Housing Trends Update for the 55+ Market: Summary 1

The Baby Boomers are now age 47 to 65 with age 55 being the legal threshold for housing to be age-restricted and designed specifically for this market. The National Association of Home Builders and MetLife Mature market Institute undertook a study entitled: Housing for the 55+ Market: Trends and Insights on Boomers and Beyond. In the report Executive Summary, it states that this report is one of the most comprehensive studies of a specific market segment.

I wanted to pass along the key conclusions of the report on my blog. The following findings are taken directly from the report:

The majority of 55+ households DO NOT live in age-restricted communities.

Age 55+ households are expected to be 45% of all U.S. households by 2020.

The “Great Recession” has made 55+ new home buyers to be more practical.

The “Great Recession” has had a significant impact on how 55+ households finance their new home purchase. As an example, only 55% of the 55+ new home buyers used the sales proceeds from the sale of the existing home as the down payment. This is down from 97% in 2007!

The primary reason why 55+ move to age-restricted communities is to be closer to family and friends while upgrading the features of their new home.

Although not cited as a primary reason to move, 55+ age-restricted communities are typically well located to community amenities and transportation corridors. “Work-at-home” opportunities will become more common with technological advances, company flexibility and the cost of commuting. The home design will change to accommodate at least one office in the home.

Peak of the Week

At the peak of the week, we look back and peek forward. Fifty-Four Years of Math 1957 - 2011 in America
Author Unknown

Last week I purchased a burger at Burger King for $1.58. The counter girl took my $2.00, and I was digging for my change when I pulled 8 cents from my pocket and gave it to her. She stood there, holding the nickel and 3 pennies, while looking at the screen on her register. I sensed her discomfort and tried to tell her to just give me two quarters, but she hailed the manager for help. Why do I tell you this?

Because of the evolution in teaching math since the 1950s:

1. Teaching Math In 1950s
A logger sells a truckload of lumber for $100. His cost of production is 4/5 of the price. What is his profit?

2. Teaching Math In 1960s
A logger sells a truckload of lumber for $100. His cost of production is 4/5 of the price, or $80. What is his profit?

3. Teaching Math In 1970s
A logger sells a truckload of lumber for $100. His cost of production is $80. Did he make a profit?

4. Teaching Math In 1980s
A logger sells a truckload of lumber for $100. His cost of production is $80 and his profit is $20. Your assignment: Underline the number 20.

5. Teaching Math In 1990s
A logger cuts down a beautiful forest because he is selfish and inconsiderate and cares nothing for the habitat of animals or the preservation of our woodlands. He does this so he can make a profit of $20. What do you think of this way of making a living? Topic for class participation after answering the question: How did the birds and squirrels feel as the logger cut down their homes? (There are no wrong answers, and if you feel like crying, it's ok.)

6. Teaching Math In 2000s
If you have special needs or just feel you need assistance because of race, color, religion, sex, sexual orientation, age, childhood memories, criminal background, then don't answer and the correct answer will be provided for you. There are no wrong answers.

7. Teaching Math In 2011
Un hachero vende una carrtada de maderapara 100 pesos. El costo de la producciones es 80 pesos. Cuanto dinero ha hecho?

Home Building Update

New homes sales at the lowest level since records began in 1963.

Seasonally adjusted annual rate of 250,000 single family homes.

Median price of a home is around $202,000 – about the median price in 2003

3,000,000 foreclosures forecasted this year

2,200,000 overall construction jobs lost over the past 3-yrs. Approximately 30% of the construction industry employed in 2007

Lennar Corp will report their first-quarter fiscal results this week.
40% of their sales are to entry level homebuyers

KB Homes will also report their first-quarter results
70% of their sales are to entry level homebuyers

Even if the signs and trends remain less positive, we are poised for great things in the housing industry and the economy will follow!!! Position yourself to ride the wave of success.

GDP

2nd quarter 2009   - 0.7%
3rd quarter 2009      2.2%
4th quarter 2009      5.6%

1st quarter 2010      2.7%
2nd quarter 2010    1.7%
3rd quarter 2010     2.6%

Release dates in 2011 Gross Domestic Product
4th quarter 2010

Advance Estimate January 28     3.2%
Second Estimate February 25     2.8%
Third Estimate March 25             3.1%

Is this a great trend!! If the first quarter shows an upward trend in the GDP or even stays level, our economy is on the mend in spite of all of the problems. As housing goes …. So goes the economy!

                                           1st QT            2nd QT           3rd QT

Advance Estimate                April 28           July 29            Oct 27

Second Estimate                  May 26           Aug 26            Nov 22

Third Estimate                      June 24          Sept 29            Dec 22

Sustainable Land Development – Ensuring Growth in a Green Economy

At my seminar in San Antonio, Texas, March 23-25, 2011- next blog post on Monday, March 28th.

Next scheduled seminar July 28 & 29th in Seattle, Washington

Sessions include:

Land Development Industry Overview
Sustainable Land Development Projects
Low Impact Development
Leadership Energy Efficient Design
Mixed Use Community Design Case Study

Vertical Integrated Mixed Use Projects
Land Development Engineering Opportunities
Social Networking for the Land Development Engineer
Diversification & Profit Centers
Cluster Land Planning Hands-on Exercise

The Difference Between Cost and Price

By Pat Riley, Allen Tate Company

Are you waiting for home prices to fall before you act?

It makes sense to try to buy a home when you believe it has hit the rock bottom price. I totally get that. In some areas where there is additional depreciation to be played out, waiting can be the right move to make. But overall, I believe that waiting is not a good financial decision. As a buyer, unless you are paying cash, you need to be looking at Cost not Price.

What is the difference between cost and price? The cost of a home is made up of the interest rate that is paid as well as price.

The 4th quarter housing research report of last year stated that sales in America rose 15.4 percent over the 3rd quarter. With each passing day, the stability of housing prices is taking shape. As soon as Realtors, appraisers, bankers, buyers and sellers all understand the new value system then normalcy can begin take hold. Someone who delayed buying a house because of the price might find that prices have actually not decreased. They’ve simply re-adjusted to the new normal.

But, as Paul Harvey always said, “Now … the rest of the story.”

And the rest of the story is centered around interest rates. Freddie Mac reported that 5.05 percent 30 year fixed is the highest level since April 2010. The equation then is that prices are stabilizing and interest rates have gone up steadily during the past 90 days.

What that means is that, even though prices are staying the same or being compacted more, it still costs more. As the parade marched by the past 90 days this is what happened:

Today, on a $340,000 mortgage the monthly payment would be $ 1,835.60.

In November 2010 that same mortgage would have required a $ 1,656.72 monthly payment.

That gives us a difference in payments per month of $178.88 and a yearly difference of $2,146.56.

The difference in over the 30 year life of the mortgage $64,396.80

That’s a lot of numbers. So what exactly is it that I’m saying?

I am saying that, even if prices fall another 10 to 12 percent, if you desire a move up, down or over and have equity and credit THE COST OF A HOME WILL INCREASE if interest rates go up another 1 percent. Costs later this year are more of a concern than price. Price and Cost are part of this parade!

Answer 2-Questions before Buying

2-questions that should be asked before purchasing a home in today’s market. Remember the monthly cost of a home will remain about the same even with declines in prices because interest rates are increasing. In essence, if you want to create a home for your family and expect to live in your house for awhile, buy now!

Why should I buy if house prices are still depreciating?

Waiting for prices to reach bottom of the market while interest rates are increasing may result in a higher monthly cost and cost you more over the life of the mortgage. As per CNN:

“You can kiss those record lows goodbye,” said Greg McBride, Chief Economist for Bankrate.com

“I don’t think we’re going back to a 50-year low anytime soon without an economic collapse. Mortgage interest rates will probably never revisit those levels” said Keith Gumbinger of HSH Associates.


When will appreciation return to housing if I buy now?

Industry experts were surveyed and asked when appreciation would return to the housing market and most “experts” predicted prices to continue softening in 2011. They also predict housing prices to rise reaching over 10% appreciation by 2015.

“Buy low and sell high.” We may very well be at the low point regarding the cost of owning a home.

Those homeowners that purchased their home to raise a family and become part of a community will experience appreciation over the long term.

Homes by 2015 may include?

The survey results are self explanatory. However, the low response for a 2-master bedroom suite house seems out of touch with current economic and demographic data. The “great recession” has delayed family formations and may cause first time homebuyers to join forces to buy. If the home functioned for two separate owners, the niche market would be met. I would think dual master suites and other features i.e. offices with current technology may become a more viable market alternative.

February data for new housing starts was released with a seasonally adjusted rate of 479,000 new housing starts. There was a significant drop from month to month. But typically, there is a drop in starts during winter months simply because of severe weather. There was a 47% drop in apartment and condominium starts from January to February. Another alarming statistic is an 8% reduction in building permits to the lowest level on record dating back to 1960!

“As housing goes…….so goes the economy”

Kitchen & Living Room Features – 2015

Lack of vision, ingenuity, and design flare for small spaces is represented by the survey results. Nothing new and innovative – especially for the kitchen.

The living room will merge with other spaces and 30% indicated the living room will vanish from the house layout. This would indicate that the “great room” would be coming back. This is reasonable to assume as the house size continues to shrink.

What changes do you think will occur in the kitchen and living room over the next four years?

“Green” Features for Homes by 2015

Low e-windows
Engineered wood beams, joists and trusses
Water efficient features
Unlikely LEED for residential homes.

The responses lack vision and creativity. Many of these features have been on the market for 30-years and improved upon through the years. What seems puzzling to me is the lack of interest in LEED accreditation for single family homes/subdivisions.

In the ‘80’s with high interest rates and energy problems, energy conservation codes and standards became standard practice in the industry. It would be my opinion that LEED accreditation for single family homes will be elevated to a higher level as we exit the “great recession”. Not only will this be used as a marketing differentiator but buyers will expect builders to comply with a national standard. At the moment, LEED would seem to be the best program for both builders and consumers.

Single Family Home Size by 2015

Survey respondents indicated the average square footage of single family homes by 2015 will be:

63% indicated the homes to be 2000 – 2400 sq. ft.

22% indicated the homes to be 2400 – 3000 sq. ft.

In my opinion, the survey results are not reflective of cost and price realities. For comparison, let’s consider the average home square footage in the past:

1982           1,700 sq. ft.

2000           2,270 sq. ft.

2004           2,350 sq. ft.

2008           2,630 sq. ft.

2009           2,440 sq. ft.

2010           2,380 sq. ft.





The square footage will continue to decline from the 2,380 sq. ft. and may even be smaller than 2,000 sq. ft. by 2015.

Broad Trends for New Homes by 2015

The National Association of Home Builders survey on what the traditional single family house will transform into is of interest. I will compare the survey results with previous recessions and offer my opinions, as food for thought.

74% indicated single family homes will get smaller.

Without a doubt, new homes will become smaller primarily due to the decline of existing home prices in most markets. In addition, land has not declined in price. Thus, once the lot inventory of failed or distressed subdivisions has been exhausted, builders must reduce the square footage of the home to lower the price point.

In the ‘80’s, to generate sales we released 900 sq. ft. homes. Lot sizes remained the same.

In the ‘90’s, to generate sales we released 1,200 sq. ft. homes on 1-acre lots with existing infrastructure.

In both cases, homes sold and our production continued. Certainly not at a quick sales pace but it was sustainable. It would not be unreasonable to think that lots will get smaller, homes smaller with buyers seeking sustainable communities.


68% of respondents indicated homes will have “green” features.

This seems to be a high response for green features. In the ‘80’s, energy conservation was the top priority with many design approaches still in place today i.e. insulation, SEER ratings, etc. Any feature beyond the norm, I would consider a marketing ploy and the pay back longer than 7-yrs. The redesign of a smaller house will be the issue over the next several years.

29% indicated more Technology Features

This survey is much lower than what I would think. Technology is changing rapidly and homeowners will want their home to be managed with technology. If I had a choice on a priority between “green” and technology features, I would stay on the crest of the technology wave!

“The New Home in 2015”

The National Association of Home Builders released the results of a survey about expected housing trends over the next five years.

“The New Home in 2015” Special Studies, March 2, 2010
by Rose Quint, Assistant Vice President for Survey Research
Economics and Housing Policy
National Association of Home Builders

Report available to the public as a courtesy of http://www.housingeconomics.com/

I wanted to use this report and reflect on past housing recessions as a guide. In the past, there were ideas and concepts that worked and some that didn’t work. Regardless of the trends and the survey results, to sell a house in today’s market, set an overwhelming price for the value.

We must consider some other changes expected over the next four years and beyond.

4,000,000 added to the population each year

2,000.000 workers added each year

4,000,000 enter retirement each year

Nationwide in 2005: 70% graduation rate

63% earn a BA within 6-yrs.

Next week, I will review the survey results and use our past to judge the validity of the survey results.

What is your definition of “The American Dream”?

Is the American Dream – a dream job, being a leader, owning your own business, raising a family, owning a home? For me, The American Dream is being a land owner.

Land:     location, vistas, terrain, vegetation, and its own unique characteristics.

A land owner is being a partner in preserving land for future generations. Homes may change but the land will remain.

What is your definition of “The American Dream”?

Peak of the Week

The map illustrates the “underemployment” rate by state. Have you ever wondered how these statistics are complied? We are overloaded with statistics and none are positive. All I know is that the real estate industry is in a state of malaise. This economy reminds me of the Carter years except the interest rates are about 14% apart! Looking forward, the GDP trend is what to watch and not the unemployment or underemployment rates.

The peak of the week post is to look back and to peek forward. With the price of gas continuing to trend up, consumer spending will also suffer – choice may be bread or gas? Thus the spiral will continue. My motto during the Carter years was “nice but not necessary”. I think this approach is appropriate today and in the future.

Buyers Looking for Great Deals

The past several months have been a roller coaster ride for the real estate industry. There have been ups and downs — highs and lows — and everything in between. But regardless of the market conditions, most buyers are still looking for a great deal.

Luckily, for most there are a lot of great deals to be had. 47% of the homes sold in Charlotte in 2010 were in the $100,000 to $250,000 price range. It’s a matter of finding the house that fits all of your needs and qualifications at the right price. For some, purchasing a corporate or REO home has been a way to make this all come together.

Corporate Homes are generally executive homes where the seller has been transferred and has received a corporate buyout. REO (Real Estate Owned) properties are bank owned foreclosed properties.

In both cases the sellers are corporate entities which are often more realistic when it comes to pricing the property to sell it in a timely manner. Some things to consider if you decide to go down this road:

• Corporate homes have often been pre-inspected and neutralized.

• Because the corporate entities have never lived in the home, they are able to remove emotion from pricing decisions and price according to market demands.

• REO properties face enormous competition with the glut of foreclosures currently on the market and are usually priced to sell.

• And don’t be fooled into thinking that all these properties will be in questionable condition. Some are sold “as is”, but others have been refurbished and many of these corporate sellers will make reasonable repairs when needed.

So for many buyers, the way to getting that great deal is by checking out the corporate and REO homes in their area. Remember, a corporate home or REO is a commodity to the sellers and it is all business. Therefore, approach buying the home as a business decision when submitting your offer to purchase. Personally, I would offer at least 20% lower than the sales price as a start.

Case Shiller Home Prices

The graph shows only the top metro areas and may not be indicative of your specific market. However, the trend in home prices is worth noting. Case Shiller is predicting further declines in home price.

 
Let’s use this graph for the Charlotte market. Home prices in 2003 are lower than the prices is 2010. The graph seems to indicate this. I have been assisting homeowners with their appeal of the County real estate tax revaluation. This revaluation compares prices from 2003 to 2010. Real estate taxes in the Charlotte area, for the most part, will increase based solely on prices. If the politicians raise the tax rate, homeowners will be in serious trouble since this would further put a strain on their pocketbook.


The national news commentary discusses market generalities but each housing market must be analyzed on its own characteristics and community factors. For Charlotte, prices are certainly lower than the peak of the “bubble” but higher than 2003 – the last time real estate taxes were set by the county.

Social Networking – Marketing Fundamentals – Part II

This post is the second in a series on social media marketing from a non-professional social marketer. It seems to me that anyone posting a discussion item on “How To” should have experience in the area of discussion. I can certainly tell you how to buy and sell land for a profit, but I can’t really tell you the best way to use social media. In fact, I am not sure there is an expert out there – maybe someone that uses social media outlets 24/7. I did find a list of fundamentals of social networking that might help you in your efforts.

Linking – it is reasonable to assume that your efforts can be linked to all of your networking groups. I do promote some of my blog posts on LinkedIn. I should be sending out an enewsletter to my sphere of influence. I have started to seek guest bloggers and in return post certain posts on other blogs.

Relationship Building – social networking such as LinkedIn allows you to promote your connections and build on your relationships of mutual interest. Continue to connect with your contacts. I have started to ask “How can I help you?” You need to continue your social networking efforts on a consistent and continuous basis.

If you should wish to know more about my LinkedIn approach and successes in building contact relationships, please let me know. If anyone has an approach for Facebook, please include a comment.

Social Networking – Marketing Fundamentals

As you know, I do not have a marketing background but have been actively involved in LinkedIn. I have been asked about my approach to social networking and in essence, it is marketing, branding, and connecting. However, the core principles that guide me in my business pursuit include:

Have strong Beliefs – know where you are going – have goals
Be an Optimist – be a positive role model - appreciate life
Relentless Preparation – answer the unanticipated, sense of calm with practice
Invest in Others – be a mentor - assist others without expecting anything in return.
Live in a State of Gratitude – 86,400 seconds in a day – how will you use this time?
Act rather than react – take action
Reinvent – do what you do and always have done – differently

Let’s take the above statements and apply social networking marketing fundamental to each:

Focus – your social networking and marketing should be focused on your goals and business strengths. Try to avoid going off on tangents which is easy to do while on the internet. Use your expertise to focus your marketing campaign on your expertise. Although, my blog seems to have a wide range of topics, my approach to LinkedIn has become more focused on real estate issues.

Quality – without a question, your social networking content should be relevant to your clients and your goals. I am on Facebook but find LinkedIn to be a forum allowing more valuable professional interaction with potential clients.

Listen – if you watch, listen, and follow group discussions and networkers, your interaction will be based on their needs and not your own promotion. Learn what is important to those you would like to connect with. Read their profile and understand the groups they belong to.

Patience – on LinkedIn, I have had the patience to grow my contact list, strengthen my group participation and direct my group activities. My contact list is nearing 800 and my group “Land Development” is nearing 2,700 members. It has taken awhile to reach this level of interaction but it has already achieved results.

“Sustainable Land Development – Ensuring Growth in a Green Economy”

I have been giving a 2-day seminar on real estate development for the American Society of Civil Engineers since 1997. Over the past several years, this seminar has not seen the attendance but continues to be of interested for real estate professionals.

Join industry participants in a proactive forum outlining the future of the real estate development industry for residential and non-residential projects. Learn how the industry will change in the future and how best to manage this change.

Also learn sustainable project design and program elements which will alter development patterns in the future. Practical business and profit center concepts and ideas will be highlighted. The seminar schedule for 2011:

San Antonio, TX                     March 24 & 25
Seattle, WA                            July 28 & 29
Charleston, SC                       September 15 & 16
Washington DC                      November 3 & 4
Houston, TX                          December 1 & 2

Contact me if you should wish to learn more about this seminar.

GDP

2nd quarter 2009      0.7%
3rd quarter 2009      2.2%
4th quarter 2009      5.6%

1st quarter 2010      2.7%
2nd quarter 2010     1.7%
3rd quarter 2010     2.6%

Release dates in 2011 Gross Domestic Product

4th quarter 2010
Advance Estimate      January 28       3.2%
Second Estimate        February 25     2.8%
Third Estimate           March 25

The GDP will be significantly impacted by the rise in oil prices and commodities. The first quarter GDP estimates will be published in late April, 2011. We will be into a new economic period for two months by then and we will not need these estimates to know how the economy is holding up