April 2016 Case Shiller And What It Means Looking Forward

April 2016 Case Shiller And What It Means Looking Forward

Yesterday morning Case-Shiller reported an average 5% gain in home prices across the country.  Portland, Seattle and Denver lead the nation with gains year over year in the 10% range.  Many of the 20 Cities used in by Case-Shiller, report at or above bubble peaks. house_bubble_new By any measure this is good news for homeowners and while growing more expensive, hopeful news for home buyers.  The question on everyone’s minds of course is, can it continue?

I hear talk amongst my fellow Realtors that they are concerned that values are too high.  Are we in another bubble they ask?  Obviously all anyone can do is guess, but some have more empirical data to guess than others.  Case-Shiller bases their calculation on data from the 20 largest metropolitan statistical areas or MSA.  This is a large swath of data and why so many watchers of real estate look so closely at it.  Myself, I only have data on my little corner of the world, the Conejo Valley and the real estate along the Ventura/Los Angeles County line (search available inventory here).   Thus my opinion reflects the unique idiosyncrasies therein.

The area I work has prices starting in the mid $200’s (a few condos) and venturing into the occasional 8 figure property.

5520 Wembly Web-11

5520 Wembly Drive  Oak Park, CA

When I run my numbers which I do monthly, I focus on the supply side.  I look not at the prices but the inventory and the percent change month over month.  Since in a normal year I list about 7 homes of every 10 I sell, supply is very important to me.  Supply also is a great indicator on the direction of any market.   In part because I’ve been tracking so long, I know for example that in fall of 2008 there were just over 1,300 homes on the market in my little valley and that 10.5% of the available homes were under contract.  Last month available inventory stood at mid 500 units for sale and over 40% over the available homes were under contract.  This is a picture of a healthy albeit tight market.  By tight I mean not a lot of homes on the market.  In fact, if we had more homes under $750, the % of homes under contract I predict, would be higher because this is the most popular price range here.

To the question of a bubble, Case-Shiller makes no such suggestion.  Rather, they speak to the low interest rates environment, consumer confidence on the overall economy, low unemployment and of course, the shortage of available housing.  My personal belief is that to have a bubble you have to have some type of artificial demand booster.  Preceding the Great Recession, mortgages were easy to obtain with many buyers, particularly right before the crash, able to obtain a mortgage with little or no income, down or credit.  Not exactly a solid foundation.  In the late 1980’s, prior to that bubble burst, lots of money was coming in from Japan.  Stories of Japanese investors showing up to model home complexes with a brief case filled with a couple hundred thousand dollars, are the stuff of legend.  Some might point to the declining number of Chinese buyers as something to watch.  I would imagine that Chinese money which has had little or no real impact on my market, would be of importance in cities like San Marino and Montebello where the Chinese population is significant.  The strength of the dollar has slowed European and Russian money coming over and buying prize properties in New York, Miami, Beverly Hills and the like.  Most of my colleagues from the Westside of Los Angeles report slowness in the trophy property market; the $10M+ range.  My area has not experienced much of this kind of money so the impact has been minimal.

832 Via Sedona Web-33

Check out the best in California Lifestyle right here in the Conejo Valley!

Moreover, if I were to hazard a guess, I would suggest that the majority of cities across the country have had little or no impact by foreign investors.

So back to the question of a bubble, the absence of artificial stimulus like easy money or foreign capital suggest the key component of bubble making is missing.  This leaves me to conclude we are not in a bubble.  Moreover, as Case-Shiller suggests, it is the economy and the availability of low interest rates that is driving this market, that and very low inventory.  So what should we be watching for then as an indicator of what is yet to come?  Clearly the strength of the economy is now and always will be the bell weather of the real estate market.  When the economy falls into recession, housing should and will follow.  This is healthy.  What isn’t healthy is when the real estate market is the leader in the declining economy like it was in the two previous housing bubbles.  The thing I can’t stop looking at is the simple demographics of our population.  The population isn’t getting smaller.  Homebuilders are still not building enough housing and certainly not enough apartments and lower price point homes.  Heck, in areas like Coastal California and Ventura County in particular, (contact Tim here) slow growth ballot initiatives look to continue forever a slow-to-no development environment.  The NIMBY (Not In My Back Yard) mentality keeps builders from building only furthering limited supply.  Real Estate Investment Trusts (REIT’s) are holding huge numbers of homes off the potential “for sale” market by permanently or near permanently, converting their massive inventory into rental properties, further constricting supply.  Baby boomers just now 70, are not selling in mass and by and large, are staying put.  Another reason of constrained supply.  And lastly, the Millennials are only now starting household formation and will be looking at buying homes, fueling the demand side of the housing equation for the next 15+ years, all the while in a tight inventory environment.  Will Brexit bring down the US economy?  Unlikely.  If anything, it will only strengthen the dollar and the 10 year US Treasury which is the driving force behind mortgage rates.  Strong US bonds mean low rates of return and this means even lower mortgage rates. So for as long as our economy continues to expand and unemployment remains static or declining, we should be in for a continuing climb upwards on home pricing.  This is good news for would be sellers and encouraging news for would be homeowners in that the future is bright and home price appreciation, far from over.

Posted in Real Estate | Leave a comment

Relocating To Thousand Oaks And The Conejo Valley: What You Need To Know

 

The first thing you need to know about relocating to the Conejo is that it’s pronounced Koh-nay-hoe not Cone-Joe.  Conejo means rabbit in Spanish.  The Conejo Valley is one of the most beautiful places on earth and arguably the most special in Southern California.  The weather is near perfect.  The schools incredible.

schools

For more school info click here

You can go for a breathtaking hike with ardent hikers or your 5 year old one minute and then at the beach the next.  We are located midway between Downtown Los Angeles (think Lakers, Kings, Clippers, world class museums and Broadway theater) and Santa Barbara (think romance, wine tasting, art walks and shopping).  Both are 45 minutes without traffic so allow for 1.5 hours as a rule, this is greater LA after all.  We have a regional trauma center and hospital and a fashionable indoor-outdoor mall with Nordstrom’s.  You’ll find employers like biotech giant Amgen, food giant Dole, music giant Guitar Center, insurance giant Anthem, the newly relocated LA Rams and the list goes on and on.  Home to nearly 200,000 people (about 400,000 when you factor in neighboring Calabasas, Camarillo, Moorpark and Simi Valley) it’s a fantastic place to live, to grow old in or to raise a family.

Thousand Oaks, the area’s largest city, has more than a thousand oak trees.  They’re beautiful and grand.  Should you find one on the property you like, be advised that you can’t cut it down.  You can’t even trim a branch if it is larger than 4 inches in diameter.  Suffice it to say the fines for damaging or removing an oak tree in Thousand Oaks are hefty.  We do love our oak trees and they are protected.  We also love our open space and the Conejo Valley is completely ringed by protected regional, state and national park land including the majestic Mt. Boney, the last mountain in the Santa Monica Mountain range.  It makes for spectacular outdoor scenery and activities but it also means you won’t find many new homes being built.

balcony view of Boney.jpg

Mt. Boney

The Conejo Valley rests atop the Los Angeles and Ventura County lines.  For example, Westlake Village which is home to our most expensive real estate, was incorporated in 1981.  However, Westlake Village makes up only half of what we consider Westlake.  This is because a California city cannot be in two counties.  Thus, when Westlake Village

westlakesign resized

Westlake Village

became incorporated only the LA County side was allowed to do so.  The Ventura County side was absorbed into the city of Thousand Oaks.  The zip codes for Westlake south of the 101 Freeway are 91361 for both counties.  The address used is Westlake Village.  Go north of the freeway and it’s 91362 and called Westlake Village for both counties as well.  More significantly, the school districts are entirely different.  If you want your kids to go to Westlake High School (Conejo Valley Unified School District) you must live on the Ventura County side.  The LA side goes to Agoura High (Las Virgenes Unified School District.)

In 1982 Agoura (pronounced Uh-goor-uh) incorporated into Agoura Hills, leaving behind a swath of homes over the Ventura County border in unincorporated Ventura County.  This area originally known as Agoura now bears the name of Oak Park.  Oak Park has its own zip code: 91377, its own government and most importantly its own Blue Ribbon school district (Oak Park Unified School District.)  Unlike Westlake, Oak Park successfully resisted incorporation into the city of Thousand Oaks.  When you ask someone about Oak Park the first thing they mention are the schools.  Since most of the schools throughout the Conejo Valley have Great School rankings of 9 out of 10 or better, the fact that Oak Park is known for schools means something special is going on there.

To recap the craziness of the various municipalities and the County Line, we’ve got two Agouras, two Westlakes and three schools districts.  There are unincorporated areas as well as 3 sub-cities in Thousand Oaks: T.O. proper, the aforementioned Westlake (part of T.O.) and to the south west, Newbury Park.  Temperatures by the way vary from Agoura Hills to the Newbury Park by as much as 15 degrees on a hot summer’s day.  Newbury Park is cooler since it’s closer to the ocean.  Nothing demonstrates this unique nature of our boundaries better than Westlake Island (and yes there actually is a lake in Westlake).  The entrance to the gated island is by way of a street named La Venta.  This is derived from LA/Ventura because the road is literally the county line.  In fact, “The Island” is smack dab in the middle of the lake (Search for Westlake homes here) and is literally divided in half.  Half on the Ventura side, half the LA side.  The Conejo is also home to three other lakes.  Two that you’ve likely not heard of are Lake Lindero and Malibou Lake.  Malibou Lake (yes like caribou) was a cabin-on-a-lake getaway for Hollywood Celebrities as early as the 1930’s.

Agoura Malibou lake above

Malibou Lake

I can picture some famous Hollywood actor bouncing across the San Fernando Valley on a then two lane Ventura Blvd., up and over the Calabasas grade then left into the canyons, finally pulling up to a cabin nestled above Malibou Lake in the foothills of the Santa Monica Mountains.  Homes with lake rights are actually part of a co-op called The Malibou Lake Mountain Club and offer a truly unique lifestyle in the mountains while only being 7 minutes to Agoura and the 101 freeway.  The lake many people may have heard of is Lake Sherwood.  Built around the sensational Jack Nicholas designed PGA quality golf course, this community of mostly single family homes starts in the $2M’s with town homes in the $1M range.  The Sherwood Country Club has hosted the Tiger Woods Open

shergolf2

Lake Sherwood Golf Course

and Greg Norman’s Shark Shootout golf tournaments and boasts the only tennis club that features all 3 court surfaces.  Lake Sherwood was named after Sherwood Forest because Errol Flynn’s 1938 classic film Robin Hood was partially filmed there.  Lake Sherwood is unincorporated Ventura County and like it’s even more expensive horse ranch neighbor Hidden Valley, has no municipal government.  Resident children attend the Westlake schools on the Ventura County side.  In addition to our amazing public schools, the Conejo has a multitude of private schools including La Reina Catholic Girls High School and Oaks Christian which spans all ages and has had their share of famous name alumni/alumni parents, plus a bunch of other parochial and non-parochial including the esteemed Carden School.

Another curiosity for most first time visitors here is that the Pacific Ocean is both to the west and the south.  We are located on the odd part of the California coast line where the state bends so that the ocean is on two sides.  Not a big deal but this tends to throw off your sense direction since the 101 freeway runs north-south from San Francisco to Los Angeles except the portion from Ventura to the San Fernando Valley, where it runs east-west.

As for housing… that’s my expertise.  In spring 2016, the least expensive single family home was in the $500K’s.  Prices range to 8 figures when you include Sherwood, Hidden Valley and a handful of homes near the North Ranch Country Club in Westlake.  The median is somewhere in the mid to upper $700K’s.  You can also find town homes and senior housing where prices are under those marks and even into the $200K’s.  Neighboring Calabasas is generally comprised of pretty high end, gated neighborhoods while Simi Valley, Moorpark and Camarillo (pronounced Kamm-a-ree-oh) offer a greater variety.  If you ask residents in each of those adjacent cities, they will tell you all the reasons they actually prefer their town to Thousand Oaks, Westlake or Agoura.  In Moorpark for example, when the little league season opens, the entire town shows up for the parade.  Moorpark also is home to Moorpark College part of the Ventura Community College system and a natural feeder into UC Santa Barbara, my alma mater.  Drive down the major streets of Simi or Moorpark and you’ll see banners heralding local young men and women who are serving in our military.  Heck, Simi Valley is home to the Ronald Reagan library.

ronald_reagan_libary

Ronald Reagan Libary

Camarillo will tell you that at sea level you don’t need air conditioning and that it’s home to the Camarillo Airport, the outlet mall and Cal State University Channel Islands with its newly created school of engineering.  Located on what was once the California State Mental Hospital, the buildings of CSUCI also claim to be the inspiration of the Charlie “Bird” Parker song, Relaxing In Camarillo.  Being a professional musician and Arista recording artist in life BRE (Before Real Estate) I love that trivial fact…  Other nearby major universities include California Lutheran (also known as CLU or locally referred to as Cal Lu) the off season training grounds of the Los Angeles Rams and Pepperdine University in Malibu.  Yes, Malibu and everything it offers, is just 13 minutes from the Conejo Valley via Agoura Hills or Calabasas.

Moving to a new area can be a big life-change, but the Conejo Valley is one place that it shouldn’t be.  The Civic Arts Plaza

Civic Arts and Gardens shots 025

Civic Arts Plaza

 

offers great entertainment, touring shows etc., CVUSD has wonderful programs for kids in the autism spectrum, Moorpark has great horseback riding; baseball and soccer reign supreme in all the towns and I believe virtually every religion offers multiple places to worship.  We even boast a Mosque in Newbury Park, copper dome and all.  The canyon roads are popular for motorcycle and sports car enthusiasts as well as cyclists including a portion of The Amgen Tour of California, not to mention vintage watering holes like The Old Place and The Rock Store.  So if you’re moving to this area, consider yourself blessed to have such a wonderful place to call home.

tim_cy_home

Tim

The old timers still use 1000 Oaks, Ca on their return envelopes (thinking about buying or leasing?  Visit 1000oaksrealestate.com  here) and will proudly refer to our Valley as God’s Country, because it really is that beautiful.  There’s a lot to talk about if you are relocating to Southern California.  As a native Californian, California real estate broker, Certified Residential and Corporate Mobility Specialist, I’d like to help with your relocation (contact Tim here).  Whether you’re looking for a luxury estate property or a more modest family home or condominium, let me welcome you to your new home right here along The County Line.

 

Posted in Amgen, Corporations, County Line, Foe Sale By Owner, For Sale By Owner, Home Buying, Home Selling, Real Estate, Safest Cities, Thousand Oaks, Tim Freund | 2 Comments

Should I Buy The Most Expensive Home In The Neighborhood?

 

There’s an old adage in real estate: Never buy the most expensive home in the neighborhood.  But what happens when you want to?  What happens when the best home in the neighborhood really is the best home and you want it?

3880 Prado Del Trigo named pic 033

Obviously the idea behind the adage is that if you buy the least expensive home in the neighborhood, your property value and capital appreciation would be “pulled” up with the neighborhood as a whole and thus the gains you’ll experience will be greater than more expensive properties.  I’ve seen this and it is undoubtedly true.  But so what?  If the only goal of home ownership is capital appreciation, then sure, it makes sense, but home ownership is so much more than that.

I have always taken the position that I want to try and buy the best of something that I can afford because by buying the best, I’ll never have regrets.  Now some might call this wasteful or missing the big picture.  I however take the position that the difference in money between something outstanding and something good, is seldom large enough to warrant the trade-off.  For example, a few years ago I listed and sold a home that the largest lot and the best view.  The home had a pool which most lots in this neighborhood couldn’t handle; it sat atop the hill with views as far as the eye could see, with snow capped mountains in the distance every winter.  honey creek rearWhen I met with prospective buyers I would tell them, this is the best and only one person can own the best.  Many would be buyers hemmed and hawed.  “Sell it for money like the comps down the street,” they would say.  I explained that quality costs and only one can own the best.  Believe it or not, I’ve I actually sold this home three times.  When it was new I told friends of mine, it was the best and they went for it.  They put it tons of upgrades and spared no expense.  The second owners paid a substantial premium for that home at a time when no one was buying anything.  The third owners did the same and in each case they gladly paid the premium and I know for a fact that if you ask any of them they would tell you, it was worth every penny.  The old sales master Zig Ziglar used to say, “It’s better to apologize for the price once, than the quality forever.” As many of you who follow my writings and visit my

facebook_page

Visit me on Facebook

Facebook Business page know, I just finished a substantial remodel of my home.  It was Hell, but the end result is gorgeous.  I probably spent 15% more than I needed to get all the details and amenities I wanted.  Let’s face it, being in the home-selling business I see lots of cool features.  I can tell you unequivocally that people will always pay when a home has been done up correctly and the design vision of home complete.  Take for example a mid century modern home.  When an owner of an Eichler for example, has decorated in the Atomic Ranch 2396 Hood Dr. Wideor Googie furniture, Eames etc. style, the house looks incredible and people jump at it, fighting over it even.  Same is true for any architectural style.   I recently saw a Craftsman style applied to a basic tract house single story.  The owner had sandblasted the eaves and painted them brown.  The siding and stucco were an olive color, the windows had been done in with the red clad on the outside, wood on the inside, a very expensive window, yet the package was so convincing that you’d think it was a Greene and Greene in Pasadena somewhere.  The seller wanted a 30% premium.  A side bar on that home: It didn’t sell for the premium the owners wanted, but not because there weren’t takers, but because the owners found that they could make a small fortune renting it on AirBnB  because the style was so cool.  This is a new and unique time we find ourselves in isn’t it?

The point I’m trying to get across is that in every neighborhood, in every city, someone bought the most expensive home just as someone bought the least expensive.  Someone will always be willing to pay the premium.  Do you get every penny out if you do buy the most expensive or make yours the most expensive?  Not always for sure, but that doesn’t mean it wasn’t worth every penny you spend.  Remember a home isn’t just an investment, it’s your sanctuary; the place you raise your children and create the memories that last a lifetime (Search available inventory here).

I have a philosophy on money and savings and it’s this: We have to plan for the future and  live for today and we won’t know if we got it right until it’s too late.  Thus I try not to be too hard on myself when I want something a little extravagant so long as I can afford it.  On that note, I have to run.  I have two clients buying the most expensive homes, on the biggest lots with the most incredible views, in a new home neighborhood this morning and I’m so excited for them, I can barely contain my enthusiasm.  Someone will always buy the best and I’m thrilled to have it be my clients.

 

Posted in Home Buying, Home Selling, Real Estate | Leave a comment

Tight Inventory: Continued Multiple Offers Or Housing Bubble?

620 Kingwood Web-18There is probably nothing so disheartening in the real estate world as writing an offer only to find you are not alone.  With Coastal California inventory still so tight especially in the “more affordable price range” of under $1 Million, multiple offers are back and in full force.  It’s not like they really went away exactly, great properties priced right often have multiple offers.  What makes the current situation so difficult is that it’s no longer just the great properties, it’s also the pretty great properties.  In fact, it’s even the pretty good ones so long as they are priced right.  It appears that there just aren’t enough good, well priced properties to satisfy the demand.  This begs the question, are we in another bubble? In summer 2006 I was at a BBQ in Palos Verdes and a friend’s friend was telling me how he’d been buying distressed properties in the Inland Empire at a discount and renting them but that he and his partners had begun liquidating because the market was over heated and the bubble was going to burst.  I smiled and explained that there just weren’t enough homes to meet the demand and that I couldn’t see that we were in a bubble at all.  I had actually thought the bubble was going to burst in 2004 and when it didn’t, I was “all in” to borrow a poker term.

What I didn’t understand at the time, was the reason the demand was so high was that loans were being made to people who weren’t qualified.  If people actually had to qualify, demand would be much lower.  In fact, demand was so high and loans were so easy that at the peak of the bubble home ownership nationally stood at over 69%, the highest level on record.  So what about today, is today different?

Of course every real estate cycle shares certain common elements, that mainly being supply and demand. supply_demandv2It may look different but it’s always about supply and demand.  In the late 1980’s heated demand was fueled by money pouring in from Japan.  Mid 2000’s it was easy financing.  Today you could argue historically low interest rates are the driving force and the absence of inflation makes investing in real estate more attractive than the equity markets.  (Questions?  Ask Tim) I might be willing to accept this if it weren’t for the obscenely high rents and the continued difficulty in obtaining a mortgage.  Rents are so high in greater Los Angeles in fact, that the average Southern Californian renter is spending roughly 50% of their income on housing.  That’s highest in the nation.  Clearly this must be unsustainable.  Yet what is the alternative?  City close is where the jobs are.  Sure, people will move out farther and commute, but that has a cost in time, productivity and money so many will choose high rent as the willing sacrifice.  Owning is unquestionably the better scenario when compared to renting.  While this isn’t always the case, at current rent levels, it surely is.

Consider for a moment a 3 bedroom apartment in suburban Thousand Oaks for example, where there’s decent employment, great schools and commuting distance to the major metropolitan centers, doable.  You get a 3+2 with lovely wall to wall carpet, vinyl in the kitchen, not the nook by the way, white walls, fiberglass insert showers, Formica counters and no garage for $2,350 a month.  Whaaaat!!!???  You think I’m kidding don’t you?  I’m not.  Oh and it was built in the mid 1970’s with single pane windows.  That is somewhere roughly equivalent to a $400,000 house payment.  Owning really is cheaper than rent.  So when everyone goes out to buy, that will create vacancies and rents will come down accordingly right?  In theory that might be possible but the reality is not everyone has the down payment, credit or income to afford a $400,000 home.  So rents are high and likely to stay that way and that means continued attractiveness for home ownership from those who can.

Then there’s the demographics and specifically I’m referring to the aging Baby Boomers and the Millennials.  BB_46-64The Boomers were the largest population group in American history (1946-1964).  They are just now hitting 70 and have begun the very slow migration out of large homes and into one story’s and then assisted care etc.  But as we live longer, Boomers too stay in their homes longer, many choosing to bring hospice in rather than move to some facility somewhere.  This means that while they may be in the process of selling they are doing it slowly and then buying so the net change is really zero in terms of % change in home ownership.  Simultaneously the long awaited arrival of the Millennials is finally upon us.  Millenials (1982-2004) are actually a larger generation than the Baby Boomers, something economists and demographers never imagined possible two decades ago.  For Millennials, housing formation has just begun, albeit later than any generation previously and this is creating new pressure on the lower end inventory, first time buyers and midsized homes in the “more affordable” sub $1M mark (Search available inventory here).  So tell me, which of those two generational examples suggest demand is going to wane anytime soon?  Try neither.  Add to this the lack of construction from 2008-2012 during the Great Recession and the rise in population through immigration and birth rate and guess what?  Lots of pressure on available inventory.

Then there’s the challenge of getting a loan.  Not that it’s like it was in the Housing crisis, it’s not impossible today, but you have to be qualified.  No ifs, ands or buts.  In fact, the percentage of home ownership today in contrast with the 69% of 2006, is below 64%, the lowest on record.  This is why we are not in a bubble.  If we are feeling a shortage of supply and home ownership is at record lows, there really isn’t enough housing.  Not enough close-in homes, not enough condos, not enough apartments.  Sure there are areas like Detroit where there’s lots of vacancies and no jobs, but go to any urban center where there are jobs and you’ll find the same scenario over and over: inventory is tight.  This is not to say that the cycle of boom to bust isn’t going to happen ever again, it always does to some degree when the economy slows and people lose jobs.  But I don’t see a scenario where supply exceeds demand for at least 15 years.  Not until the Boomers really do make their way towards assisted living and even then it will take another 15 years to work through that.  That’s 30 years folks.  Until then, expect tight supply and the trend of multiple offers to be the norm.

 

 

Posted in Economics, Real Estate, The Beatles | Leave a comment

Remodel Or Don’t Remodel, That Is The Question

Remodel Or Don’t Remodel, That Is The Question

Let me begin by saying I have just about finished an exhaustive 3 month remodel.  Remodeling is a challenge and frankly, you’re probably better selling and buying a new home already updated– just sayin’, it’s tough. image1 (sellers take note, fix your place up and buyers will want it way more…)  What did I do?  New floors, baseboards, doors, window sills and wainscot; built ins, carpet and paint, kitchen cabinets, counters and appliances, lighting.  Well the lighting isn’t done yet, but you get the idea.  Mostly first floor.  I think Shakespeare himself would have a hard time defining my experience.  Romance, tragedy, comedy…  Because of this endeavor, I have several new appreciations and observations to share.

The first thing you need to know is that if you are going to remodel, don’t live in the home while you do it.  Pack everything up and find a place to take you, your family and your pets.  Pay for packing and storage before one person sets foot in your home.  Here’s what happens if you don’t:  You will spend the next however many months living in filth.  You’ll destroy or throw out many of your favorite things because they will be uncleanable.  You’ll be lucky if you don’t get divorced or arrested for going “Postal” on anyone of a number of people.  So to be clear, remodeling is dirty business.  The dust is beyond anything you ever thought possible and living through in it, nearly impossible.  Yet everyone thinks they can handle it.  I know I did…

The second thing is, hire a licensed general contractor.  You want someone who is accountable and overseeing everything.  Understand however that even in doing so, you will still be making tons of decisions (remodeling is the land of 1000 decisions) and mistakes are part of construction no matter how well you plan or how good your contractor but it will cost more money… that is, so long as you don’t count the money you lose by not being at work and making the money you normally would make during that time.  You have to understand that remodeling is not just about money and decisions, but about time.  Remodeling is extremely time intensive and stressful which eats even more time in lost productivity and without a contractor, you better count on being at home all the time.  I speak from experience because I chose to general my job myself (I help all my clients get their home together to sell, so I figured, of course I can general my job.  Nothing to it… Ha!)  As a result, there are still several items that aren’t done and there’s no one to get them done other than me.  Moreover, the money that you’ll be paying a plumber or electrician etc., is much more than what a general contractor will pay for the same job and those “retail” costs for labor add up really fast.  Believe me there are no savings there.

Third, it costs so much more than you can even imagine.  (Memo to buyers: upgrades are worth every penny because you don’t want to have to do them yourself!)  The adage that it will cost 20% higher is not true, it’s more like 30%+.  Why?  Because you change things as you go along.  I’m speaking of course of change orders, of which there will be plenty.  There will be opportunities presented to you during your remodel that are “Do it now or forever hold your peace.”  And there’s no, “I can always do it later.”  There is no later.  Oh, you’re skeptical are you?  Ok you need an example, how about this:  you’re putting in new flooring and you’ve already decided that you’ll put in new baseboards.  But what about the baseboards upstairs or in the room or rooms, you aren’t touching?  image_2Are you really going to bring back a contractor later once you realize that the old ones look terrible when compared to the new ones? Moreover, that it will never be cheaper than right there and then?  The cabinet man that was working on my kitchen got a call from the job he’d just finished.  The job was in Beverly Hills which is a pain to get to even when you live in Beverly Hills.  The owner had been unable to decide if he wanted dividers in his kitchen drawers.  The job is otherwise done when of course he realizes that he needs dividers.  So he calls the cabinet man who tells him it will cost $800.  “$800???” the owner screams, for dividers?  The cabinet man explains that since he is no longer on the job, he has to come and measure which means 1.5 hours in the car each way.  Then has to get the material, cut it, drive back to install on another day so that’s three days.  Had he been asked while he was there anyway, maybe $150.  I hadn’t planned on putting in new entry doors, but once the trim and casing went in, I realized that the old door looked like dreck and I needed new doors.  I got the doors on sale, just $1,800.  But then I needed hardware: $750.  Then they had to be hung, never cheaper since the guy was there already, there’s another several hundred and oh yeah they need to be painted and stained, $800 more.  The decision in was never cheaper but wasn’t cheap: total cost $4,000… uh, that wasn’t in the budget…  Those types of questions and opportunities arise throughout the entire process.  Delay and you’ll pay way more down the line or you just live with it.

The fourth thing:  Resist the temptation to buy everything cheaper on line.  First if it’s wrong, and it will be, you’ve got re-box and ship it back.  This costs both time and money.  Second, it may look great on the Restoration Hardware or some such sight, but it’s very probably poorly made overseas and too expensive to pack and return.  Plus, the contractor or trade hired to install it has to sit and read the instructions since it’s not something he regularly uses.  Can you hear that?  It’s the sound of the dollar meter running in the background while your guys sits and tries to figure out what the heck you bought and how it gets put together.  Think doll house assemblage on Christmas eve only you’re paying some guy $185 to figure it out.

The fifth thing: perfection doesn’t exist in construction, not on most budgets anyway.  My wife has a friend, The Switchplate Lady (www.swithcplatelady.com) who paints outlets and switchplates to look exactly like the stone or wood they are attached to.  She’s truly amazing and an incredible artist.  As you can imagine for such work, the Switchplate Lady (aka Sandy Brodsky) works Malibu and Brentwood, Beverly Hills and San Marino, Lake Sherwood and Palos Verdes.  image_3In other words, mega mansions in 7, 8 and 9 figure range.  One such mansion for example, took up an entire city block of Brentwood!  In these homes, a cleaning crew sweeps and dusts behind the workers.  No worker is setting a paint thinner can on the new carpet and they don’t just brush sawdust onto your new wood floors.  If a miter joint is off by a quarter inch, it gets torn out and redone.  On most remodel budgets however, that quarter inch gets you a shrug of the shoulders and a “Well no material is perfect,” kind of talk.  Disappointment is part of remodeling and perfection simply doesn’t exist, no matter ow talented your contractor.  Oh and your floors get scratched, things get broken, paint gets splattered, not everything fits together as it should and no matter how much time you thought it was going to take, it takes significantly longer.

My story is not unusual, in fact it’s downright common.  As you can see, the decision to remodel is not one to be taken lightly.  So when your parents or friends or Realtor tells you, “you can always remodel that after you move in,” be very careful and remember remodeling takes time, money, a lot of patience not to mention very strong relationship.  So if you’re home shopping and see a home that needs work and another more expensive one that doesn’t, don’t forget my story and buy the more expensive one.  If you just love your home and it’s time to remodel, then move out, hunker down.  “It’s a lot like giving birth,” people say… to an elephant maybe.

Posted in Home Selling, Real Estate, Remodeling | Tagged , | Leave a comment

El Nino’s Coming, Tips To Protecting Your Home

You’ve owned your home for many years.  Perhaps you’ve even done some remodeling.  Remodeling and building maintenance are two very different things.  One you get to enjoy the fruits of your labor, the other you just get peace of mind.  Here are a few things that you really need to pay attention to and this is never more true than in an El Nino year.

With winter upon us and predictions of heavy rain throughout California, the first most obvious thing to attend to is your roof.  1Most people only think about their roof when it’s already leaking, not exactly a great strategy.  So what to do?  You need to call your local roofer or your local Realtor for a referral (Contact Tim Here) if you don’t know a roofer and ask for a roof tune up.  A typical roof tune up costs around $350 to tune up and should be done every 7 years or so.  When a roofer does a tune up they’re looking for broken tiles that might need repair.  Most people don’t realize that the tile does not keep the home dry, rather it’s the paper or “Felt” underneath that does.  The tile is there to protect the felt.  When there is a slipped or broken tile, the paper is exposed to UV light and this causes the paper to become dry and brittle.  This in turn is a quick path to a leaky roof.  The second thing the roofer looks for is the mastic around the flashings… huh?  That is, the rubberized industrial adhesive that is used to seal the gaps between the sheet metal vents that breach the roof, paper and tile.  This includes along the edge where the chimney meets the roof.  Next time you’re at home, go across the street and look back to your home.  Imagine that each vent pipe you see sticking out of your roof is a hole cut in the felt and roof tile.  Mastic seals the flashings however, over time mastic like any tar or rubberized material, dries over time and cracks.  Cracks in the sealer mean a greater likelihood you’ll get a leaky roof.  Cleaning gutters is another reason for the roof service as well as cleaning valleys.  The valley is the “V” shaped sheet metal at the joint where two angles of the roof meet.  Those valleys however become easily blocked by leaves, dirt, pine needles etc.  Don’t think for a minute that having debris on your roof is giving you, “an extra layer of natural protection.”  Quite the contrary, it’s a leak waiting to happen.  Like all water, water coming off a roof flows downhill, but when the valley is blocked by debris, a dam is formed.  Then water backs up essentially flowing up hill.  Since the paper overlaps to allow for runoff, water flowing up will go under the paper and cause a leak.  I recently closed on a home where the owners had lived for 26 years.  There had been some roof leaking above the master bed in the past but had been repaired.  Unfortunately, what no one realized was that while the roof had been repaired and the ceiling repainted, the wall behind the seller’s headboard had not dried out properly and, you guessed it, this led to a mold problem.  Making matters worse was the fact that the mold problem wasn’t discovered until the day the furniture was moved out, which in our case was the day of closing.  Thus the seller had to attend to the mold issue after close to avoid a lawsuit.  We quickly had the area scrubbed and the mold eradicated to the tune of $1,800.  Of course the seller absorbed this cost even though they had no idea prior to furniture removal that such a condition existed.  Had the roof been serviced every 7 years as it should have been, this prickly and very stressful situation could have been avoided.

Another important winter repair are your drains, both yard and sewer.  Because California has been in the grip of a drought for 3 years, our trees have become very thirsty.  Thirsty trees will find water wherever they can and this includes your yard drains and sewer pipes.  Both these pipes can usually be cleared out by a plumber using a combination of a snake with small saw blades to cut up the roots and high pressure water to blast the debris out.  flood picFailure to do this can lead to flooding and backed up sewer lines.  Wait too long and the hydro will no longer clear out the debris and this means re-piping.  When my mom recently replaced her driveway I suggested that she have a plumber run a camera down the sewer pipe to determine if it was clear since it would never be easier to repair than when the driveway was torn up.  It cost about $150 to get a DVD made with the camera in the line and don’t ya know?  The tree roots invaded the line and the connection to the City main was broken!  That ended up being an $8,000 repair, at least the driveway didn’t have to be torn up and re-poured.  By the way, do you now whose responsibility it is to repair the connection of a home’s sewer line to the sewer main?  The home owner, even though it is under the street and past the property line.

I’m sure you’ve noticed at times you need to paint.  Eaves, garage and window trim, exterior doors, decks… If you have wooden windows you’re probably used to painting them regularly, same for a deck.  If you don’t, you may think that you can wait to do doors and trim until the next time you paint the whole house.  This deferred maintenance is a mistake.  Exposed painted wood further deteriorates due to weather and the sun and failure to repaint will lead to water and weather damage and wood destroying pests like dry rot.

Wet weather can cause other problems too.  If you normally don’t use a key to enter your French door to the back yard or the door from the side yard into the garage, chances are the key isn’t going to work well if at all.  While WD40 may be a good lubricants for hinges, they are a disaster on door locks.  The way to lubricate a lock is with graphite.  Your local hardware store sells graphite and often the little tube it comes in actually has a key on it.  Graphite gets ‘Puffed” from the small tube into the key lock and into the door latch itself.  Do this and it will operate as smooth as silk.  I can’t tell you how many sellers provide me with a key that barely works or is sticky.  “Yeah that lock is kind of difficult,” my clients will say.  I then break out my tool kit (As a Realtor I carry a little tool kit for just such an occasion) and with a quick puff of graphite, Ta-Dah, the key and lock work just fine.  You can take the mechanism apart and dust in graphite on some of the interior moving parts, just stay away from the greased portions.  Graphite costs a couple dollars.  A new side door lock could be $100 and your front door can run as much as $1,000.
So when it comes to El Nino and maintenance in general, remember the old adage: An ounce of prevention equals a pound of cure.

Posted in Real Estate | Leave a comment

Happy Holidays: Real Estate 2016, What You Can Expect

As we move into 2016 there are many questions hanging over the real estate market, both locally and nationally.  The impact of certain events and behaviors of certain policy makers leave plenty of room for changes in direction, but I’m going to go out on a limb and try to shed a little light on what I think is going to happen, and hopefully spread a little holiday cheer as 2015 draws to a close.

The most often discussed event casting a shadow of uncertainty over the market is the impending rise in interest rates.  Let’s get something straight right now: rising rates do not necessarily cause a slowdown in the real estate market. In fact in moderation, rising rates are a boost to real estate values and the market in general as people who have been sitting on the fence about buying or selling, choose to accelerate their plans to “Get in before the rates go up further.”  4(Find a home here today!)  Moreover, it is a common misconception that higher rates drive prices down.  The thinking is of course, that higher rates mean higher costs thus lower affordability and that means prices have to drop.   While it is true, higher rates mean higher monthly payments and therefore lower affordability, lower affordability is offset by higher incomes.  Ask yourself this, why do rates rise?  Answer: Inflation.   What is inflation?  Rising prices, rising costs.  Rising prices include real estate and rising costs include the cost of labor.  Thus rising wages offset higher interest rates… to a point.  Naturally, moderation is the key phrase here but modestly rising interest rates and moderate inflation do not a market kill.

Here’s a concept:  Globalization and international currency relationships effect rising interest rates.  Let me explain.  Unlike decades ago where every economy was an island unto itself, today investors from economies all over the world are chasing return on investment and greater yield.  They are looking to any and all nations to find that safe return and where is the safest place to invest your money?  No place is safer to invest than the U.S.

So what happens when the U.S. has a better rate of return than other developed nations?  People buy U.S. Treasuries.  In Germany for example, the 10 year bond pays sub 1% and in Japan it is a negative number, meaning if you want to buy a government bond in Japan, you actually have to pay them.   So what is going to happen when the U.S. Federal Reserve begins raising interest rates, offering a higher and safer rate of return while other developed nations?  Investors will flock to U.S. Treasuries, even more than they do now.  And what happens when demand increases but supply doesn’t follow?  Prices go up and when the prices of bonds go up the yield, which moves in the opposite direction, goes down.  This means that even as the Fed raises, interest rates go lower or stay flat.  So even if the Fed raises, rates will likely move only moderately as demand increasingly exceeds supply.

Speaking of affordability, have you taken a look at rents recently?  I can only opine on areas that I know firsthand (Contact Tim Here), however my perception is that rising rents are not a phenomenon unique to Southern or for that matter Northern California.  In Los Angeles, rents consume the greatest percentage of income of any city in the country.  That’s right, a higher percentage than New York or San Francisco.  Why?  Because in LA people earn less than the Bay Area or NY Metro and so while the average rent for a unit is lower in LA, rent uses a greater % of people’s income to pay.  But higher rents increase demand for purchasing because purchasing provides a lower housing cost on a monthly basis than renting.  I suspect areas that have lower wages are experiencing a similar phenomenon and their rents are rising relative to their local wage growth.  Increased demand equals rising prices, so long as the supply remains tight.  And it is tight.

So let’s talk California.  Where are all the new subdivisions?  They aren’t as common as in years past.  This is in part due to a shortage of raw develop-able land, environmental constraints etc., but also because builders just haven’t building like they used to, at least not yet anyway.  Complicating our tight inventory is the fact that from 2008-2013 it has been estimated based on historical population and building trends, California is nearly 800,000 units of housing short.  In other words, we didn’t build nearly as many homes when there were mountains of foreclosed properties as normal.  Demand was scant during those dark days so who would be building?  However as the economy improved and demand resumed, we find really miss all those units that would have/should have normally been built during years that encompassed The Great.

Demographics.  Much has been made of the Millennials and their slowness to come into the real estate market.  Well it’s now happening.  Better late than never and boy is it coming.  As the millennials move into family formation and home ownership, they being the first generation larger than the baby boomers, are putting tremendous pressure on available inventory.  This trend is going to continue for years to come.  It’s been said that Millennials want walkability and neighborhoods.  They want urban and not the mansions of the suburbs that their parents wanted.  That’s what people believe anyway.  But here’s the thing about that: While it is true that the Millennials may want those things today, it is highly unlikely in my opinion that they will want those things 5 or 10 year from now when they are having kids and looking for quality schools.  Bring on the Burbs!  The Millennials may not want what their parents or grandparents want today, but what young person does?  So does that mean they never will?  Highly unlikely.

Ultimately the real estate market will have appreciative gains and then give backs.  This is the ebb and flow of real estate.  This is the nature of all markets in all commodities.  The shortage of supply and the ever increasing population will however, culminate in rising real estate values in both the near and the long term.  Interestingly, do you know who recognizes this better than most Americans?  Everyone else.  The Europeans, the Chinese, the Russians.  rus comThey are coming to the United States and buying premium properties and paying premium prices because they understand what we in America often forget: There is no better place in the world to live and no safer place to invest than right here in the good ‘ol U.S. of A.  So that’s my stocking stuffer of 2015, real estate is going to keep rising.  It will go up, perhaps drop only to go up again, because that is what it does, what it’s always done and what it will always do.  Like Mark Twain so famously said, “Buy real estate because God ain’t makin’ anymore.”  Let me leave you with this saying you’ll find at the bottom of every email I send: “You don’t wait to buy real estate, you buy real estate and wait.”  And that, is some good holiday cheer indeed, wouldn’t you agree?

 

Posted in Real Estate | Leave a comment