A Choice of Lesser Evils

When it comes to making important and difficult decisions, it often comes down to the lesser of two evils.  Think about it, if you are tight on money, and you need new tires, you have to decide on what you’ll give up to get the new tires or if you can do without the car.  If your kid needs braces and you don’t have the money, it’s bag lunch or your kid’s a snaggletooth.  This is where the Federal Reserve sits right now.

VolkerInflation is running too high at over 8%, so to combat this the Fed has embarked on the most aggressive rate raising path in history; driving us into a housing correction and a recession.  The Fed is doing what many of us would do and look to past experience as a guide on the best way forward but is that the right approach?  In this case they’re following 1970’s and 80’s Paul Volker and radically pushing up interest rates.  Never before have rates doubled in less than a year, let alone half a year.  Unfortunately, this approach has come at the immediate expense of the mortgage business where massive layoffs have commenced in earnest.  Let’s not kid ourselves however, this is no accident.  The Fed sees the exponential increase in housing costs since the pandemic, both purchase and rental, as a core driver of today’s excessive inflation.  But is it?  It may be a contributing factor, but it’s not the whole enchilada by any means.  None the less, The Fed figures if they can slow housing, they slow the economy which reduces demand and takes pressure off prices, reversing inflation.  Home prices are coming down, many in the 8.5-10% range so far (Search for homes here) and this is not a bad thing, per se.  Most recent sellers aren’t selling, had sizable down payment cushions, and locked in amazing interest rates.  In fact, a housing correction was always inevitable, the market is never static.  Lower home prices allow more people to get into the market as affordability improves, that is, provided interest rates are stable.  Herein lies the problem.  The Fed raised rates so quickly, the system is in shock.  This is not a good thing.  Today it was reported that home sales dropped to the lowest level since 2010, the pit of the Great Recession.  I’m sorry, but that’s a problem. The saving grace here is that sellers aren’t selling en masse, keeping supply of available homes tight which is supporting home values. Whether a full blown recession is in the offing or just some navigated soft landing, only time will tell.  (Follow Tim Here).  Of course, this begs the question, will their Paul Volker approach work today?

I’m here to argue it will not.  A housing correction is one thing, crushing housing is something much different.  Moreover, deliberately driving unemployment up is down right, playing with fire.  This is what the Fed appears to be willing to do.  Currently unemployment is around 3.5% and continuing claims for unemployment are around 1.3M.  They’ve implied they want 5% unemployment which means continuing claims around 2M.  They’d rather have 2 million Americans out of work and on subsidies than inflation.  This is a terrible idea and if you ask someone if they would rather have a job than have to pay more at the pump or grocery store, I’m pretty sure they’d say, “I want to work.”


2988 Shadow Brook Ln Click for details

At this point, the Fed needs to pause.  And what if the Fed took a more cautious approach?  What if they waited just a bit to see what effect their 3 successive .75% rate increases do to the economy before raising again?  These rate hikes haven’t even shown up in the economy beyond mortgage and real estate.  And since they’ve raised rates .75% 3 times in 3 months and apparently are poised to do so again in November, it only seems prudent they be more measured.  I mean isn’t that what you’d do?  Take action and wait to see if it delivers the desired effect?  The Federal Reserve governors are supposed to be the smartest guys in the room.  They didn’t really think they’d raise rates and then see an immediate drop in inflation to their target level did they? It takes 6-9 months for the higher rates to make their presence known in the economy.  The lack of common sense suggests The Fed is panicking.

federal resereveHere’s the problem as I see it, The Fed was late to reduce the rates and stop their bond buying, holding rates down for too long and now they are trying to make up for lost time.  Okay, so mistakes happen, but driving us into a recession in my opinion, is a bad idea anytime.  But do they have another choice?  As with Maggie and her kid’s braces or Bill with his tires, of course they have a choice.  In The Fed’s case, the alternate choice is to let inflation run hot.  “That’s a terrible idea,” some will scream.  But is it really?  To answer this, you need to ask yourself, does demand alone cause inflation?  I mean, after all, that’s all the Fed is doing by raising rates, clamping down on demand.  By definition, inflation is too many dollars chasing too few goods.  Prices go up in response to scarcity.  As demand wanes, supply in theory goes up, but the supply doesn’t go up any more than the relative level of decline in demand.  Imagine taking a weight off one side of the scale, the other side goes up by the relative change. The Fed itself has no influence on the larger issues affecting supply like supply chain disruption coming from the pandemic or the rise in energy costs as a result of the war in Europe.  Even if demand went to near zero, the supply issues would continue.  It’s my opinion that pushing us into recession will not be enough to slow inflation to the 2% rate that the Fed states is their target.


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On the contrary, I’d suggest they cannot get there until such time as the war with Russia is over and China stops their zero Covid policy and the supply chain heals.  In other words, they don’t influence energy costs nor product availability and frankly, as energy goes, so goes inflation.  Therefore, pushing us into recession while inflation is still hot, will I believe, lead to the worst possible scenario.  Inflation + recession = stagflation.  Stagflation is combining a bad economy with inflation and almost impossible to remedy without substantial pain.  This is what confronted Volker in the 70’s and 80’s when we were in a recession while facing high inflation.  Inflation, I will add, that was largely caused by an energy crisis, sound familiar?  What’s different now is that our economy is strong and unemployment low.  As long as we stay out of recession, we can avoid stagflation.  By the way, owning a home is arguably the best place to be should stagflation really come to pass.  A stable payment, a roof over your head and paying down a mortgage.   (Find out what your homes worth).

World-Bank-warns-of-70s-style-stagflation1If you accept my premise, the question we and The Fed must ask is, of the two evils we are left with: inflation or recession, which is the lesser evil?  I’d argue that recession is never the right answer and that until the supply side issues get resolved, it’s better to live with some inflation.

Posted in County Line, Demographics, Economics, Home Buying, Market Conditions, Market Conditions, Real Estate, Real Estate Correction, Recession, Seller Advice, Thousand Oaks | Tagged , , | Leave a comment

Abbott And Costello Meet The Killer (Jerome Powell)

JP Draft 4If you’re an old movie buff like me, you love Abbott and Costello.  These guys always had movie titles where they “Meet” someone, ie” Abbott and Costello meet The Wolfman or Abbott and Costello Meet The Mummy.  So why have a title Abbott and Costello Meet The Killer (Jerome Powell)?  To understand this inside joke, you have to listen to  Abbott and Costello’s marvelous routine “Who’s on first?”   The gag has the two comics naming ballplayers that all happen to have interrogative pronouns for names.  Who’s on first, What’s on second, I Don’t Know’s on third etc.  So when Lou Costello asks “who’s on third?”  Bud Powell answers, Who’s on first, I Don’t Know is on third.  Lou: “I don’t know is on third?”  Bud: “Yes.” Lou: What’s the guy’s name on third?”  Bud: “I don’t know’s on third.  What’s on second.” And so it goes until Lou eventually says “ I don’t know,” they simultaneously point and say “Third base.”  Still makes me smile just writing it.  The reason I chose this story to frame the current Fed dilemma, is because no matter what the Fed does, it’s inflationary

abbot-and-costelloHindsight is 20/20, so of course we can see that The Fed should have stopped their QE bond buying long before February 2022 and they should have started raising rates mid to late 2021.  Heaven knows it was patently obvious to anyone in the housing trade that inflation was running amuck.  That said, raising rates sooner would have helped for sure, but it would not have substantively changed our situation.  Why?  Two words: War and Pandemic.  (Ask Tim A Question) As much as people want to point fingers at the Fed, the reality is inflation was coming with a war in the form of energy inflation.  You can’t have one of the leading producers of petroleum and natural gas, suddenly stop selling without driving the price of those energies up.  In turn, higher fuel cost adds cost to everything because everything requires manufacturing or transportation and that requires energy.  Adding costs to produce or deliver something is inflationary.  If you recall, it was the Oil Embargo of 1973 that spurred the incredible inflation of the 1970’s and early 1980’s.  Equally inflationary, the Pandemic shut down the supply chain both here and abroad, which created scarcity.  Scarcity raises prices and that’s inflationary.  To avert economic catastrophe resulting from the pandemic, Congress (under both administrations I might add) authorized huge fiscal stimulus and so the Treasury had to print a lot of money.  This flood of dollars for scarce goods is – you got it, inflationary.  None of these situations are controlled or even influenced by monetary policy.  This brings us to Abbott and Costello when throughout their routine eventually Costello says, “I don’t know” and the duo respond in unison, “Third Base.”  So now when you look at any action the Fed takes in order to curtail, contain or reverse inflation, like the gag, substitute inflationary for “Third base”. (Search for homes here)

Jerome PowellFor example, The Fed is raising interest rates at an unprecedented pace without waiting for the effects to manifest.  But this is designed to slow the economy, right?  Yes but… higher US rates make the US Dollar stronger.  A stronger dollar means Europe, England and Asia have to pay more of their weakened currency to buy American goods and services.  This is globally inflationary.  Those nation states in turn raise the price of their goods and you got it, inflationary.  The Fed bought mortgage-backed securities, US and corporate debt known as Quantitative Easing or QE, as a means to get us out of The Great Recession and again when the Pandemic forced us to shut down the economy.  So how does the Fed buy debt and where do those dollars come from?  They have the Treasury print more money which is… inflationary.  Now they have increased their balance sheet to a whopping $9 Trillion.  They need to reduce that balance sheet and sell off that debt. 

rentsThis is known as Quantitative Tightening, or QT, and they began selling debt in early September.  This is a good thing though, right?  It puts pressure on rates as they are not only not a buyer (decreasing demand) but they are actually a net seller (increasing supply).  This means more bonds in the market, which must be discounted to sell to a reduced number of buyers and this raises rates which slows the economy.  This is another way to attack the demand side of inflation by effectively taking those excess pandemic dollars out of the economy.  By removing dollars from the economy, the Fed is shrinking the Money Supply.  Remember, inflation is too many dollars chasing too few goods.  So, the Fed sells bonds in exchange for dollars and those dollars come out of circulation and are given back to the Treasury.  Great news, right?  Yes except… when you reduce the supply of something, in this case dollars, you make the value of the existing dollars go up, making the dollar even stronger against foreign currency which is, you guessed it, inflationary. Damned if you do, damned if you don’t.  Anything the Fed tries will be inflationary so long as there’s a war in Europe and a supply chain issue.  Crushing US demand will slow the economy and almost certainly drive us into a recession, but will it stop inflation?  The answer is it will slow inflation and maybe reduce it some but no it won’t stop inflation.  What will stop inflation is an increase in supply.  You can’t stop inflation by only addressing the domestic demand side.  That just punishes working Americans and American business. 

So, like The Abbott and Costello routine, if you ask me: “Who’s on first?” I’ll say, “Yes”.  If you ask, What’s the guy’s name on first?  I’ll say, “What is on second, Who is on first.”  when you say, “I don’t know!” together we say, “He’s on third.”  So when Jerome Powell says, “Let’s raise rates or let’s shrink the money supply,” we say in unison: “Inflationary.”


Posted in Economics, Home Buying, Home Selling, Market Conditions, Real Estate, Real Estate Correction | Tagged , , , , , , , , , , , , , , , , | Leave a comment

To Get the Highest Price, Start with a Good CLEANING

You’ve made the decision it’s time to sell your home.  You’ve hired a Realtor to advance this cause and now you have to prepare your home for sale (Contact Tim Here).  There are several things you can do to get more money that don’t cost a lot of money, but none are more important than cleaning.

This may sound ridiculously obvious, so let me elaborate.  When I mean clean, I mean really clean.  To a buyer, clean tells them the seller has taken pride in their home and if they’ve done a great job of keeping it clean, perhaps they’ve also done a great job with the maintenance of the home. 


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Clean also means they can move right in.  Upgrades, no upgrades, if it’s clean, they can move in.  If the home isn’t clean no one is moving in; not until it’s been cleaned.  This takes time and time is money; your money, money that you leave on the table because the home wasn’t clean enough.  So here are some tips about cleaning.

Take a granite counter for example.   If you have expensive granite counters, don’t ignore them.  They should never be sticky or gritty.  If you have granite counters, wipe them down with a clean sponge or cloth and then dry them.  Then use a product like Granite Gold to really polish them up.  A clean granite counter should feel smooth and polished to the touch and when you look at it in the light from a low angle, you shouldn’t see any wipe marks.  Make sure you feel under the bullnose, too.  This is where sticky likes to hide and your buyer will notice it.  If you have tile, attack the grout.  For some kitchens you will need to bring in outside help in the form of steam cleaning.  This is a process much like carpet cleaning, where a hand held steam cleaner injects hot cleaning solution and then extracts the dirt and soap out of the grout.  This will make your gray and dark grout, sparkle like new.  It’s really quite remarkable.  The hardest part of this process is finding the company that does it.  It works on the nastiest kitchen grease or shower mold.  This also works wonders on your tile floors where repeated mopping and kitchen grease has embedded grime and darkness into your grout.  Steaming will make it sparkle!  And don’t forget to re-caulk afterwards.  The caulk that came with your home 15 years ago has long since dried and separated.  In a shower it turns pink or has irremovable black spots.  Get a razor blade and a tube of white latex caulk.  Cut out the old and squeeze a nice even bead around your sink and toilet base, wipe away with a damp towel.  In the shower use clear silicone.  Not handy enough?  No problem!  A handyman can knock it out in no time for cheap and man will your bathroom thank you and so will your buyers.

Speaking of grease, take a look at your stove vent hood.  Odds are you’ve not cleaned the underneath nor the wire filters recently, most of us don’t.  But every time you turn on your hood, air, dust and grease are passing through those filters.  Put them in the dishwasher along with you metal cooktop grates and wash them.  If they don’t come clean, consider buying new ones, they’re not expensive and it makes a world of difference for both sight and smell [Contact Tim here].  If you have the old style, non-sealed burners, another part you might consider replacing is the tin pans under the grill; a clean piece of foil is lame, don’t do it.  Take that a step further, look at your oven racks.  If you’ve used the self-cleaning feature with the racks in, the stainless steel shine will have come off and they’ll be difficult to slide and may even look a little dusty or rusty.  If this is the case, buy new ones.  They’re not super expensive and can make your oven look a lot newer inside.  I’m not making this up, buyers look at this stuff and the nicer every detail looks, the more move-in ready your home appears.  That has real value to a potential buyer and they will pay extra for it.

One area that’s missed a lot is the outlets and switch plates… We had a seller a few years ago who took the upmost pride in keeping her house clean, and we mean CLEAN.  One of her tricks is Clorox wipes.  She uses these on her switches and outlets.  If you take a moment and look at the tops your switch plate covers and the switches themselves, you will probably see a small line of dark dust.  You should clean this.  Try a dry brush first and see if that does it and then go with the wet clean, it’s a little easier if you get the first layer off before using the wipes.  Here’s the thing, often when you turn the switch on to clean, you don’t notice the dust.  That’s because it’s usually in the off position  for most of the day’s hours so the top of the actual switch gets dusty but when you flip the switch on, you can’t see it anymore.  I like to say that the way you can tell a really clean home is by the switches and plate covers.

Every Realtor will tell you to have your windows and screens done, but don’t forget the tracks.  This is especially true for lower windows that sometimes get hit by outside sprinklers.  The dust in the tracks becomes like a grimy, gritty sludge and if you have a dog, it will often have dog hair in there too.  Totally gross and you may have never even noticed it!  This is some tedious work, but do it and it will mean more money in your pocket.

On the topic of dust, be sure you dust your light fixtures, ceiling fan blades, tops of your door jams and behind things like plants, TV’s, pictures and inside bathroom drawers and medicine cabinets.  Hair in the brush drawer is not saying “Buy me” to any prospective buyer and neither is a rusty old medicine cabinet.  You can easily replace a medicine cabinet.  “Whoa” you say, “Really?”  Yes really.  If you think for one minute that not doing this won’t enhance your home, then you really need to do it because if you don’t think it matters, you’ve never done it.  It matters!  Remember, the thinking is if you’ve got a super clean home then you probably have maintained the integral components of the home too, like A/C and roof.  When a home looks neglected on the cleaning, it often portends to other neglect that will cost the future homeowner big money down the road [See what your home is worth here].  Remove this potential objection and you’ll sell faster and net more money.

Shower doors and enclosures are often a problem.  This can be a little tricky if you have really hard water.  Calcium deposits can be impossible to clean and can even etch your enclosure.  This means you may need to buy a new glass enclosure.  This can cost $1,000 or more, but we’re talking about relatively small money in the big picture and if a buyer looks at your nasty shower door hinges, their immediate reaction is going to be “I need to remodel the bath.”  Cha-Ching!  They’ll want a big remodel discount off your price.  That’s not to say that if your bath needs to be remodeled a new shower door or enclosure is going to save the day, but if your bath is in otherwise decent shape and just the corners are gross and the glass has impossible to clean calcium, spend the money and get new glass.  $1,000 out of pocket to potentially make thousands is money well spent.

Carpet cleaning, carpet stretching, carpet patching.  If you can’t afford new carpet or just won’t do it and assuming it’s not entirely hideous (in which case replace it no matter what!) at least have it professionally cleaned and if it’s buckling, then have it stretched.  By the way, if there’s a stain, get a carpet guy to cut a piece from somewhere and patch it in.  Many times you can “steal” from one room or closet and use that to patch with, while buying a new bit to put in its place.  You can always find a little remnant for an out of the way closet that no one will notice if the carpet is just a little different. But an ink, bleach or pet stain in an obvious place is going to cost you.  So if you won’t replace, at least patch.

Pets.  Oh how we love our pets, but pets smell.  Make sure you bathe your pets and then go buy them new pet beds, toys and blankets.  BluzySo often I walk into a home and it’s Dog City.  The house is clean but the dog bed reeks of stinky dog and it makes the whole house smell.  Buy them a nice new cedar filled bed and you’ll thank me for it.  Heck, so will your dog.  Same for cat box.  Clean your cat box daily and change the litter often.  Even if you’ve got the battery powered, cover kind of box and clumpy litter that lasts a generation without changing, change it anyway!  By the way, don’t forget about the land mines in the back yard.  Don’t wait four days and do a bulk yard pick up or wait for the gardener to do it.  Your buyer is going to walk into your back yard and if it’s gross it reflects negatively on your home and you.  Worse, what if they step in it and track dog poo onto your carpets.  Yikes!  And don’t forget to sweep regularly especially along the wall and in corners where pet hair gathers.

Finally about smell, don’t get plug ins and be very careful about infusers.  You don’t want to over power the room.  The buyer will immediately be turned off and assume you are hiding cigarette smoking or pet odors.  Instead pick up some pleasant smelling potpourri. Subtlety is key when battling odor.

I could go on and on about cleaning tricks and tips, but I think you get the idea.  Cleaning is the least expensive and best thing you can do when preparing your home for sale.  Take the time and do it right and be thorough.  If need be hire someone to do it for you.  You don’t want a little cleaning to stand between you and the maximum sale proceeds you’re entitled to, but failure to clean properly will do just that.

Posted in Economics, Home Buying, Home Selling, Market Conditions, Market Conditions, Remodeling, Seller Advice, Tim Freund | Tagged , , , , , , , , , , , , , , | Leave a comment

Housing, Rising Rents, and the Decline of the Middle Class

The end of every month is, for a data hound like me, my favorite part of the month.  Case Shiller home sale report, the National Association of Home Builders data around home-starts and permits pulled and the National Association of Realtors data on pending sales comes out.  These are the numbers that indicate where the housing market is and possibly where it’s going.  Important rental data can be found on sites like Zumper.com, a blog that posts what’s happening in rental markets nationwide.  The picture the combined data demonstrates is one of high cost to buy and high cost to rent.  Rising rents in particular are very concerning because high rents disproportionately affect lower income families.

Much has been made of rising interest rates and the slowdown of the housing market.  While it is true that the purchase market is slowing under the weight of the largest rate increases in history, soaring prices and the ever-increasing lack of affordability, housing prices are still holding up.  Sure, there are more price reductions and there was a decline month over month, but this can be attributed to the seasonality of late summer, back to school etc. and the fact that homes with negatives, ie: condition or location, are having to reduce to find a buyer.  This is how it’s supposed to be. These are signs of normal market behavior [Find us on social media here].  The reason prices aren’t dropping equally across the board is because there are still too many buyers for the inventory available.  If you question this, just take a trip to the mall and make note of how many babies, strollers, and pregnant women you see.  Millennials are starting families en masse and they are looking for homes to raise them in.  But inventory is not going up.  On the contrary, it’s peaked and is declining.  Regarding our local market of the Conejo Valley, inventory is down 10% since late July.  It’s pretty hard to have prices decline substantially when there are still more buyers than homes.

Wooden blocks with the word Rent, house and up arrow. The concept of the high cost of rent for an apartment or home. Interest rates are rising. Real estate market. Increased demand for rental propertyBack to rents; according to Zumper, rent on a 2 bedroom apartment in New York City, the most expensive market in the country, jumped year over year by an unconscionable 46.7%!  But they aren’t alone.  Nashville is up 26.7%; Boise 11%; Glendale, AZ 24.1%; Greensboro, NC 31.8%; Tulsa 23.3% – I could go on… it’s mind bending.  I just listed a 500 SF 2 bed/1 bath flat in the heart of the San Fernando Valley for $2,050/mo and have had no fewer than 60 inquiries.  This is not good.

The problem with high rent is that it keeps people from getting ahead, increases poverty, decreases disposable income and reduces the ability to save and stay out of debt.  In Los Angeles, rent takes on average more than 50% of people’s weekly paycheck.  We are becoming a nation of renters.  Where once the road to the middle class and self-sufficiency meant a driveway and a 3 bed/2 bath home.  Today, the road to the middle class is quickly become a fairy tale.  For without home ownership as a vehicle to build personal wealth, most Americans won’t have a chance.  Home ownership is and always has been, the clearest path to the middle class.

How did we get here?  You don’t have to look any farther back than the Great Recession to find the bulk of your answers.  We essentially stopped building new housing from 2008-2013.  As a result, we are way behind where we should be to house our people.  And if that weren’t troubling enough, consider what happened in 2012: Wall Street went into the single-family home landlord game.  When the market began showing signs that it had bounced off the bottom, lenders like Bank of America, inexplicably unloaded all their bad debt and foreclosed homes to hedge funds and REITS.  What’s even more galling is hedge funds like Blackstone and Invitation Homes as recently as 2017 received $1B in financing help to purchase an additional 48,000 single family homes, from none other than Fannie Mae, the government owned entity created specifically to help individuals achieve home ownership [See what your home is worth here].  Private equity firms like Blackstone, KKR, Apollo, Carlyle and REITS like Invitation Homes and American


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Homes for Rent right here in Agoura Hills, now own more than 300,000 single family homes.  And while that is only .02% of the roughly 94 million single family homes, they also own a quarter million manufactured homes and over 1 million apartments.   But the numbers are even more disturbing because their ownership is not evenly spread out and instead concentrated in certain urban/suburban marketplaces.  According to Americans for Financial Reform, private equity firms own 1 in 9 single family homes in Charlotte, 1 in 10 in Tampa, 1 in 12 in Atlanta.  They also disproportionately target black owned neighborhoods where in 2021, 1 in 3 homes purchased in predominantly black zip codes went to institutional investors.  rentsSo defensive was Blackstone that in March of 2022, they posted a “Myth and Fact” page on their website disputing that they have a disproportionate influence and control over residential rents. With this kind of ownership concentration, is it any wonder buyers can’t find a home to buy?  Private equity has been on a buying spree and are even partnering with home builders and buying entire subdivisions for rentals.  That’s a whole ton of inventory that’s not for sale and a whole lot of rental property under the control of a very few.  Think they might be able to raise rents at a whim without difficulty?  You bet.  Just look at the graph above at how much they’ve raised rents since Q4 2020.  What’s even more crazy, is that all those private equity owned homes are occupied!  They aren’t just vacant.

What’s it all mean?  To my thinking it means we need to build more homes and do so fast.  Call it national security.  Call it national responsibility.  Call it what you will, but understand, without the ability to buy and hold real estate, the wealth gap in America is going to grow exponentially and rents are only going to continue to skyrocket.  It’s been said, that the role of government in a capitalistic society, is to control capitalism.  Capitalism by definition is win/profit at all costs. Profit without regard for society.  Don’t believe me?  Check your history books [Contact Tim here].  It was because of this that in the early 20th century, the Federal Government began clamping down on monopolies.

What to do?  Besides building, one solution to this issue would be to compel corporate home ownership to sell.  One way to do this would be to impose a tax on corporate home ownership linked to the number of homes one corporation can own.  Moreover, that tax would need to be progressive getting higher and higher as the number of units owned passes various thresholds.  Without the progressive tax element, corporations will just pass the tax on to – you guessed it – renters.  Think of it like a salary cap on professional sports teams: you can go over the cap but it’s going to cost you, big time.  None of this is in lock step with the American dream of home ownership and the national wealth that is created through that home ownership.  Neither is it consistent with the idea that success should be rewarded when someone like me proposes sweeping disincentive and crushing tax policy.  But something must be done.  We cannot dream of a land where the streets are paved in gold when, in fact, they are paved with rent checks.

Posted in Demographics, Economics, Home Buying, Market Conditions, Market Conditions, Real Estate, Real Estate Correction, Recession, rent, Rental Advice, Tax Reform, Thousand Oaks | Tagged , , , , , , , , , , , , , , | Leave a comment

Reports of My Death Have Been Greatly Exaggerated

Mark-Twain-QuotesIn 1897 while traveling London, an article came out that Mark Twain had died.  When asked by a reporter about this and his health, Twain replied, “Reports of my death have been greatly exaggerated.” So why this quote for a blog on and about real estate?  Ahh.., because reports of the death of a seller’s market have been greatly exaggerated.  Make no mistake, we are still in a seller’s market.  Allow me to explain.

When the Fed began tightening interest rates to reverse inflation, the real estate market took a quick kick to the head.  When rates reached 6% in early summer, the market began to slow down dramatically as affordability took a hit.  But as summer has continued a few things have happened that have caused the market to regain some footing.  Rates for example, dropped as the prospect of a recession grew in the minds of Wall Street traders.  Why did they think this was going to happen?  Simply put the yield curve inverted.  This is a term used when the shorter-term bond is offering a better return than the longer term. “2’s and 10’s” they like to say.  The yield on the 2-year treasury was higher than the 10-year treasury.  [Find us on social media here] Normally the shorter term pays less (think of a short term vs. long term CD at your bank).  Thus, when the shorter pays more, historically this is an indication we are heading into recession.  I’m not going to explain the relationship of yield and price, except to say investors bought up the long-term bonds rather than short term and that caused the rate on the long bond to drop.  Another key recession indicator is that we had two successive months of negative GDP.  This is the technical definition of a recession.  So, in technical terms we already are in a recession.  Naturally extrapolated out you’d have to conclude housing is going to fall. 


For sale in Thousand Oaks!

It’s a funny thing about memory.  Whatever has just happened is what we think will happen again.  For some in real estate, it’s the myopic thinking that the market will continue to rise without any slowdown or correction because we just experienced two years of this kind of market and that’s what they have in recent memory.  For many it’s the belief that a correction is going to be like 2008-2012.  We aren’t just going to have a mild correction, no, we are going into The Great Recession Redux.  This is because this is what we remember.  And people always are saying, history repeats itself.  Naturally therefore, we should expect a massive crash in real estate values [Check what your home is worth here].  Before I go any further, let me just say, this is not going to happen.  Why?  People can afford their mortgages for one. People have equity so the market won’t be flooded with distressed sellers just walking away and giving their home to the bank, instead if they must sell, they will – for a profit.  Demand is still massively higher than the supply of housing.   Millennials are still in the early stages of household formation.  Investors are dying for a redo of the 2009 market.  All the investors I know (and huge Wall Street hedge funds I don’t) are chomping at the bit to see prices drop substantively.  Why?  The number of homes that should have been built during the Great Recession are still not built. We are so far behind that we may never catch up!  That’s why.  There’s not enough housing and investors want to own it.  Have you seen rents lately.  My gosh, I put up a 500 SF ADU in the San Fernando Valley for lease and had 30 inquires in 24 hours.  And the asking rent is $2,050 a month!  That’s nuts.  And yet, here we are. 

I follow a guy named Steve Thomas (follow Steve on his www.ReportOnHousing.com website here).  According to the numbers, Steve says inventory peaked in June.  IMG_3776He goes on to say that amongst the many reasons that this has happened is that expired or cancelled listings are up 89% year over year!  IMG_3779He says that with 72% of all active mortgages below 4%, that sellers are simply electing to stay put rather than fight the current of an adjusting market.  IMG_3778Locally we see that the pending sales are down 15% and the number of homes for sale is up 15%.  It’s the same 15%.  This tight supply even in the absence of record high demand, is still woefully insufficient to cause the value of real estate to epically decline.  Yes, we are seeing price cuts but this market behavior is consistent with a normal market.  Historically prices rise in the spring and give some back in the fall.  This is normal seasonal behavior.  So, sellers who can no longer get what their neighbor got in the spring market, are having to reduce their price.  There’s nothing unusual about that.  Moreover, during the early part of 2022 inventory was at all time lows.  In our local Conejo Valley, that number actually went below 100 homes for sale.  In that environment, anyone with 4 walls and a kitchen could sell regardless of condition or location. This is no longer the case.  Homes with warts or in locations that aren’t desirable or are in disrepair, are no longer selling at the sky-high prices.  So here is a point of difference that’s not seasonal and strictly a situation being driven by the shift in interest rates, buyers’ affordability, and the fact that a slower market means more inventory [Contact Tim here].  More inventory means more choices and a buyer can be a little more selective.  Imperfect homes must now be priced in a way that reflects this.  This is normal market behavior.  The frenzy is largely over but great properties are still receiving multiple offers.  Good properties are selling but at a slower pace.  All this means one thing: It’s still a seller’s market – just not as strong as it was.  So yes, the reports of the death of the housing market, have been largely exaggerated.

Posted in County Line, Demographics, Economics, For Sale By Owner, Home Buying, Home Selling, Loan Modification, Market Conditions, Market Conditions, Real Estate, Real Estate Correction, Recession, Refinancing, Seller Advice, Thousand Oaks, Tim Freund | Tagged , , , , , , , , , , , , , | Leave a comment

Five Reasons You Should Buy a Home Today

Benson LR-1

For sale in Thousand Oaks

With the real estate market slowing due to rising rates and a lack of affordability for a growing segment of the population, it’s easy to find reasons to put any home purchase plans on hold.  The most common mantra is that we are poised for a pricing correction and if you wait, a better opportunity will come along in the future [Find us on social media here].  While this argument has merit, there are reasons that waiting is not the right decision for you.  Here are 5 reasons you should buy today:

Reason 1: You’ve been waiting, saving and your dream home just came on the market.  This should be a compelling argument.  Since real estate is a long-term investment, when the right home becomes available, don’t wait because you don’t know the next time that “perfect home” will come along.

Reason 2: There’s a substantial change in the family dynamic.  With Millennials now representing 43% of the home buying populace, a growing family is a big reason to sink roots and buy now.

Reason 3: Rising inventory creates opportunity.  Maybe you’ve been waiting to buy due to student debt which you’ve finally paid down or maybe you just haven’t seen the right home come along or maybe you’ve been out bid time and time again.  Rising inventory means that you have better selection and less competition.  It also means that with fewer buyers for each property you may have a better negotiating position which you can leverage into a better price.

Reason 4: Rising rents.  Despite a slowing housing market on the purchase side, rents continue to rise.  This trend is unlikely to change and in fact with a slowing housing market due to rising interest rates, many would be buyers are choosing to stay in their current rental.  This will put even more pressure on already tight rental inventory and since there will be fewer rentals available rents will continue to rise.  I was just in Golden, Co and saw on Zillow that there was not one 4 bedroom home for rent.  Not one.

Reason 5:  Inflation.  This is a two reason, reason.  First inflation means The Fed will raise rates.  If rates are rising, buying today allows you to lock in what is still considered to be an historically low interest rate for 30 years before they go up again.  The second is that housing is a great hedge against inflation.  Remember inflation means rising prices and despite the popular thinking that inflation means home values will decline, that truth is that when prices for goods and services rise, real estate is not excluded.  Inflation means that the dollar buys less/is worth less over time yet unlike cash however, hard assets like real estate go up over time. [Contact Tim here]

Posted in County Line, Demographics, Economics, Home Buying, Market Conditions, Market Conditions, Real Estate, Real Estate Correction, Recession, Thousand Oaks, Tim Freund | Tagged , , , , , , , , , , , , , , , , , , , , , , | Leave a comment

The Bifurcation of Today’s Real Estate Market

As a top producer, I try to share information of value with my fellow agents.  The other day in our weekly sales meeting I said that the word of the week is Bifurcation.  This is essentially a word meaning fork in the road.  And this is where I see our current market.

3095 Eaglewood LR-5

Sold in one day!

When you reach a fork in the road, there are two different paths before you.  However, for today’s real estate market, the choice of path is not of the seller’s choosing, rather the buyer’s.  This in and of itself is a divergence from the past two years of a seller’s market.  I’m not suggesting it’s not still a seller’s market, rather that it’s not a seller’s market for all properties.   How so you ask?

If a property is in turn-key condition, super upgraded, has an amazing view or property size or is perhaps in a super hot and popular neighborhood, it’s still firmly a seller’s market and a buyer should expect to compete and pay over asking.  In this way the market is unchanged despite what you’ve been reading and higher interest rates.  However, if the home is not tricked out or perhaps has a location issue be it backing a road etc., buyers are not bidding these homes up [See what your home is worth here].  Here you find a change in the market vs. the past 18 months.  It’s interesting really, I tell my clients that you can buy a “challenged” property (people do this all the time), fork-in-roadprovided you “Buy it right.”  By this I mean, an appropriate discount from market price because when you go to sell, you have to discount it in the same way.  What made our recent market unique was that the shortage of properties compelled some buyers to pay market for a challenged property and not buy with the appropriate discount.  In a market like the one we were just in, everything sells. But in a normal market, that’s not how it works.  And in a down market, that’s definitely not what happens.  In a down market, there’s always a nicer home or better location that must sell at the same time and the discount you have to make often times ends up disproportionate.  A home is only worth what a buyer will pay and if they can buy a better property than yours for “X” then you have to offer a discount to incentivize the buyer to buy yours.

I just listed two properties.  Both excellent locations, one totally remodeled and the other with a new kitchen and pool, and both sold within a day for at or above asking.  Conversely, I wrote an offer for a buyer on a home that had been for sale for all of 16 days.  We wrote nearly 10% below and settled 5%


Also sold in one day!

below.  Pretty good for a home that had only been for sale two weeks.  But the seller to their credit, recognized that with the interest rate environment changing, they were better to make the deal today rather than go the reduce and reduce route until they got low enough that someone would buy [Find us on social media here].  In the city of Los Angeles, where I sometimes venture for clients, listing agents are listing as much as 40% below market value.  Think about that!  Can you picture yourself asking $950,000 for a home destined to sell at $1.4M?  I had heard this has been happening in the San Francisco Bay Area for years: list a home at $1.22M and sell for $2M, but I hadn’t seen it first-hand.  Things tend to happen in the city before the burbs and this is an example of this.  When I asked several agents why, they said they were “in the market” but that because buyers expect to be in a bidding war and to pay over, the home has to be priced to ensure this is what happens.  I can see this because recently I had a listing where day one an amazing offer came in, over ask giving up contingencies etc. and I told the agent for the buyer that my sellers were going to accept it without a counter.  The agent to my surprise said, “Hold on,” and then the buyer proceeded to withdraw since they weren’t getting a multiple counter.  An example of “Herd Mentality” if ever there was one [Contact Tim here].  If you take a look, I think you’ll agree that bifurcation is the first sign of a market in flux.

Posted in County Line, Economics, Home Buying, Home Selling, Market Conditions, Market Conditions, Real Estate, Real Estate Correction, Remodeling, Seller Advice, Thousand Oaks | Tagged , , , , , , , , , , , , , , , , , , | 1 Comment

Masterpiece, Winslow Homer and the Art of Real Estate


Growing up, one of my favorite games was Masterpiece.  It was always an adventure trying to determine which pieces of art I liked, which were valuable, and which were forgeries.  The real estate market, in times of uncertainty, is much the same game or can feel that way anyways.

As you are probably aware, interest rates have nearly doubled over the past few months and at the same time prices, have jumped 20% year over year.  For a buyer today, it’s difficult to know if you’re buying a gorgeous property that offers value or if you’re buying a dud or, heaven forbid, even a forgery.  Now I know what you’re thinking, there are no forgeries in real estate, and if you are you’d be correct.  That’s the beauty of real estate, it’s not just an investment that hangs on the wall but is something you also get to live in.  So, there are no forgeries, but the feelings of self-doubt and nervousness are real.

I recently came across a Winslow Homer painting that was part of my Masterpiece game.  “The Herring Net,” is that painting where you see two sailors in a small dingy in what appears to be a rough sea.  [See what your home is worth here] They’re wearing rain slickers and caps; the sky is turbulent, and the waves are as high as the men, if not higher.  As a kid I always thought this as a very foreboding image.  However, as I looked at it today, it’s not really foreboding at all and in fact it’s an image of two men working to pull in a net full of fish.  As an allegory for today’s real estate market, I don’t think I could find a better one.

On the surface, this market is starting to show some signs that the frenzy may be easing and the shortage of available homes not so acute.  In my local market, the Conejo Valley, we started the year at an unprecedented 92 available homes.  Today we stand at 250 – a dramatic change.  And yet, in 2020, we had 440 and in 2018, we had 550!  Still, it’s undeniable that the inventory is increasing.  As you can imagine, this makes buyers feel insecure.  “Am I buying at the peak?”  “Are prices going to drop?”  Just last month I had one listing where a buyer came in over ask and gave up most of their contingencies.


Coming Soon!

When I told the agent the seller was going to accept without a counter, he said, “Hold on…”  The buyer was so accustomed to losing bids on multiples that when they didn’t’ get a multiple counteroffer, they assumed they were over paying and cancelled.  I always remind my buyers that when they win the bid, it is precisely because they offered the highest price and best terms that they won, which means of course they will be paying more than someone else offered.  Just to put a point on it, I did end up selling that home for a little less than what the first offer came in at, but not by much.

It’s funny really, but as a keen observer of economics all I hear these days is that we are heading into a recession.  That the Fed rate-hikes and “Quantitative Tightening” are going to drive the economy into the toilet.  Extrapolated out it has been suggested this means we will see a correction on home values.  And while it is true that there are substantial headwinds for the economy, inflation being a potential hurricane, we still have an incredible shortage of real estate to house our population [Find us on social media here].  And if you think that multiple offers are going away, you would be surprised to hear that just this week I had two offers in two vastly different price ranges and markets, one in Los Angeles and one in Simi Valley, lost to multiple offers.  In fact, both had 7 offers and even though both my buyers wrote well over asking, we still lost out.  As did 5 other buyers on both, I might add.

I will concede this much however, the days of sellers commanding the moon and stars may be coming to a conclusion.  You can see this as evidenced in the rise in inventory and in the price reductions that follow.  According to Redfin, 1 in 5 homes reduced price.  But that is not the same as price correction, not yet anyway.  One trend that I am seeing, is that some agents/sellers are pricing very aggressively to the low side.  I saw this with my Los Angeles buyer where one home we thought about writing on had 20 offers and was probably 40% below market.  If you looked on the surface at the asking price, you’d initially assume that the market was correcting, but when it finally closes the price will suggest otherwise.  It seems some agents are anticipating that buyers will feel more confident if they receive a multiple counter, so they’re pricing to ensure they get multiples.  After all, we’ve been dealing with multiple offers for several years now and the herd mentality is what we’re used to.  As a result of the price reductions and in response to the nervousness out there, if a home has been sitting for a few weeks, I’m having my buyers write aggressively below ask [Contact Tim here].  Because just as buyers are watching the market nervously, so are the sellers.  But you see, like the Homer painting, if all you do is look at the waves and the stormy skies, you’re likely to miss the net full of herring.

Posted in contingencies, County Line, Demographics, Economics, Home Buying, Home Selling, Market Conditions, Market Conditions, Real Estate, Real Estate Correction, Recession, Seller Advice, Thousand Oaks, Tim Freund | Tagged , , , , , , , , , , , , , , , , , , | Leave a comment

Talking About Location

Everyone’s heard the old adage, location, location, location.  But what does that really mean and why is it important?

I had a partner years ago that explained it this way:  The first location in the phrase is in reference to the town that you’re looking in.  The second is the neighborhood within the town and the third is the specific home site within the neighborhood within the town.  That pretty much nails it, I think.  So, let’s talk about why this is important to a home buyer.  First off, quite obviously not all towns are the same.  In the Conejo Valley where I conduct the bulk of my business, the 800-pound gorilla is Westlake Village.  I tell my clients it’s the last place to drop in a correction and the first to come back.  For this reason, it’s a great place to “park your money.”  Because of the Kardashians, many people are familiar with Calabasas.  Calabasas is a popular location because it’s the closest east, or closest to Los Angeles that you can live, without being in Los Angeles Unified.  Clearly the town is important.

The second location is no less important.  Where in the town?  Could be within the proximity or the sphere of the school you want your kids to attend.  Or maybe it’s the one with the views or bigger lots, or perhaps it’s gated or zoned for horses.  Finally, the last location is the specific lot that a home is placed.  For example, a super desirable location is a cul-de-sac.  I’ll often refer to the “Big 3” as being cul-de-sacthe rarest of rare.  This would be a view lot (rarest of all amenities), a large lot and a cul-de-sac lot [See what your home is worth here].  Get one or two and you are set.  Get all there and you’re in hog heaven and guaranteed, you’ll always have a buyer when you decide to sell – regardless of market conditions.  One type of lot that swings both ways might be on a corner.  Some people like corners, more open and fewer neighbors.  Some on the other hand do not, less private.  Then there’s good corners and bad corners.  A bad corner for example, might be one where oncoming cars’ headlights flash across your home every time someone turns down your street.  Another example might be a flag lot.  Some love them – long driveway, more land.  However, some buyers want to see the front of their home, so they don’t like a flag lot.  A flag lot (so called because the driveway is like the staff and the lot like a flag flying in the wind) often times is landlocked by other homes too which can be a negative.

Then there’s the location challenged properties.  These would be backing up to something like the railroad tracks or a school for example, commercial or something unsightly or even a health concern like high tension lines [Find us on social media here].  Busy streets, through streets etc. are typically to be avoided when possible.  That said, I sell homes wherever my clients want.  I do however, inform them of the location challenge and remind them that this can be OK, so long as they “buy it right.”  This is because when it comes time to sell, they will in all likelihood, have to discount their property to move it.


Oaknoll Villa Condo For Sale

This gets us to why location, location, location is important.  In a market like we have been in, we have seen a preponderance of inferior location homes come and go.  In a market like we are coming from, one that’s a super-hot seller’s market, locationally challenged homes get to take advantage of the fact that buyers will overlook location issues and because prices are rising, often time pay an amount equal to a superior location.  This is bad business, but this happens all the time.

As we transition from a seller’s market to one that may be a little more balanced, those locationally challenged properties are going to have a harder time finding a buyer.  Should we end up moving into a buyer’s market, the negative location becomes even more pronounced because in a down market, there will always be a better location that has to sell at the same time as you and will discount some to accomplish this.  Therefore, if you can buy theirs for “X” you clearly can’t sell your home backing the supermarket for “X,” rather it must be “X-Y” – or else the buyer will just buy the better location… every time.  Makes sense, right?  And since a correction in the real estate market is not a question of if but when, “buying right” is incredibly important [Contact Tim here].  The best way to avoid trying to thread that needle, is to always buy location, location, location and to hire an agent that puts your interests ahead of all else.

Posted in Economics, For Sale By Owner, Home Buying, Home Selling, Market Conditions, Market Conditions, Real Estate, Real Estate Correction, Seller Advice, Thousand Oaks | Tagged , , , , , , , , , , , , | Leave a comment

Lions, and Tigers and Oh Yes, Da Bears

In 2011 I wrote an article entitled Lions and Tigers and Bears, Oh My!   In it I discussed the consumer confidence as being a drag on what could be an improving housing landscape.  We had just seen that the number of homes in the foreclosure process had dipped from 1.9M to 1.7M.  Bernanke had estimated GDP to be around 3%.  I expressed some cautious optimism, but the lagging consumer confidence was a sprinkle of pessimism.  Without consumer confidence, the US consumption-based economy is in trouble. Fast forward to today and we have an entirely different picture and yet…

This week has been another roller coaster for US equity markets.  If you’re watching @CNBC or @Foxbusiness, you’ll hear things like, the stock market is in bear market territory.  Investors are repricing risk assets (tech companies that don’t necessarily make any money.)  Interest rates are rising at the fastest pace in 40 years in response to rising inflation [Check out what your home is worth here]. OMG, the sky is falling, run for cover!  Uh… really?  Some economists have even been making statements like this: “There’s a 24-43% chance we goCredible-inflation-forecast-iStock-1317087986 into a recession in 2023.”  What is this @Anchorman?  They sound like Paul Rudd’s character Brian Fantana when he says of his panther cologne, “60% of the time, it works every time?”  Seriously?  If the economy is really in trouble prove it!  And if there’s trouble on the horizon, how is it that continuing claims for unemployment (insurance) are at a level not seen since 1970 and still declining?   That’s right, not going up, not leveling but still declining.  We would realistically need to have 3 months with an average increase in unemployment of 3% or more, to indicate a recession is coming.  There is no evidence of that.

Consumer sentiment, however, is a wild card.  As I wrote in 2011 when the news was still negative, consumer confidence was negative.  This became a self-fulfilling prophecy in that if the consumer feels on edge or like they might lose their job, they stop spending money and this of course begins a spiral of slower growth and one thing leads to another [Find us on social media here].  Clearly the declines in the stock market are concerning.  If you watch your 401K drop by 10-20%, it’s alarming.  And yes, inflation is a real problem.  Gas, food, it’s all adding up and even though we are making more money, we’re feeling the pinch.  But is the consumer really that worried?  My answer is no.  Why?  Simple really, we have jobs, better jobs than we had 5 years ago.  We’re making more money and changing jobs means we can make even more money.  The Great Resignation it’s being called.  There are 1.9 openings for every 1 working person.  Now you can argue that in itself is a problem, but then we’d have to start discussing immigration policy and this is supposed to be a real estate blog… But no, we are not likely heading into a recession soon.  Clearly the Fed is trying to cool the economy and slow things down, so there’s a possibility of one eventually.  After all it’s not a question of if there will someday be a recession, rather when.  OK, so what about housing?

You know I had to circle back to that which I am intimately involved with, didn’t you?  I will say this: Housing is changing.  There is no doubt that with rates in the mid 5%’s the cost to buy a house is growing and it’s getting more than a little painful.  ARM’s like the 7/1 saw a 14% increase in


Oaknoll Villa Condo For Sale

applications this past week.  So, buyers are adapting and moving to a longer-term variable loan to offset the rising 30-year mortgage.  Inventory is rising but it’s still so incredibly low that so far, it’s only reducing the number of offers we see on a hot new listing.  The listings are still selling and still in many cases with multiple offers over asking.  What is changing is my phones are quieter.  This is interesting because spring is usually my busiest season and I’m not getting the calls to list property.  So, what does that tell us?  For one thing, inventory isn’t going to explode.  If it were, I’d be fielding lots of calls. 

It’s worth pointing out that from mid-May to mid-June, the real estate market is historically herky-jerky.  Mother’s Day, Memorial Day, Father’s Day and graduation, have historically been bumpy and the quiet phones could well be nothing more than usual market behavior.  I don’t have a crystal ball and I’m not an economist, though I play one on TV (kidding), but until we stop seeing “Now Hiring” in every window and as long service and supply chain related delays are common place, conspiring to further fuel pent up demand, I just don’t see how we go from boom to bust; from a massive post pandemic hottest ever economy, to a recession in a matter of months [Contact us here].  I would like to see the Fed stop pussy footing around and catch up to the bond market so that if a recession should begin to develop, they’d be in a position to lower rates quickly, but that like the immigration-labor policy discussion is for another day.       

Posted in County Line, Demographics, Economics, For Sale By Owner, Home Buying, Home Selling, Market Conditions, Market Conditions, Real Estate, Real Estate Correction, Recession, Seller Advice, Thousand Oaks, Tim Freund | Tagged , , , , , , , , , , , , , , , , , , , , | Leave a comment