Signs of the market are everywhere. I am not talking about economic indicators or several old men sitting around a table on T.V. Sunday morning talking about what they think. I am talking about the little indicators I see every day.
I deal with building developers and potential buyers every day. I hear both sides of the argument; DC is too expensive to buy in, DC isn’t making me money on my development so on and so forth. I also see plenty of people buying homes and plenty of buildings filled to capacity.
One thing I dislike is when a developer or agent tells me how great a building is and how they have buyers lined up to purchase. Please don’t tell me one thing and let me see another. The picture above doesn’t say a building is great, it says a developer is desperate to move units.
Do you know of any other signals that you look for to see if a building is popular or having difficulty moving units? I always say customers are the smartest consumers and have the best tricks for seeing value. What’s yours?
Tuesday, July 29, 2008
Monday, July 21, 2008
I read a ton, my car is littered with books and papers, my desktop is a cornucopia of saved online articles and my phone is a constant feed of RSS alerts. I don’t think you can tell everything about the market but you can get a good sense of trends by the stories that are being put out there.
I ran across a story the other day about stars who can’t afford their homes anymore. Ed McMahon is a prime example of some of the stranger stories I run across. Apparently the 85 year old star is close to a million dollars delinquent on a home he owns in Beverly Hills.
Originally listed at 7.6 million, the property is now on the market for 6.5 million, and isn’t moving. Does this mean that the economy has crashed or that that the world is about to end? No, it just means that everybody gets bad advice every now and then.
At the height of building boom everyone said the same thing, “buy today, sell tomorrow, HUGE profits!” Who wouldn’t want to do that, the rich are no exception. Who wouldn’t take the advice from a realtor that said you could flip a house in two months and make a nice pocket of change?
What is the real issue here? It isn’t that homes are overpriced or that the market has completely collapsed, it is that people haven’t managed their expectations when it comes to property sales. The responsibility lays in the agent to work with the client, not tell the client what they want to hear.
The agent should be your trusted advisor when it comes to purchasing. An agent should provide you with all relevant information and give you the best council possible. If your agent is telling you something you don’t like, simply don’t dismiss there council, listen to what they say and trust them as the expert. If your agent is telling you something that sounds too good to be true, chances are it is.
Have you worked with an agent that sold you milk and honey, who told you what you wanted to hear? Have you worked with an agent who told you the facts even though it might lose him or her a sale? What do you look for in an agent?
Posted by Anthony Lafauce at 3:07 PM
Tuesday, July 15, 2008
Driving around today I ran into menagerie of DC city workers cleaning up the building at 1831 2nd Street in Eckington. The building is a massive brick finished classic built in 1929 and is controlled by the DC government. I have had my eyes on this building for some time because of its size, location, and neglect.
Stopping to talk to a few of the city workers I found out that they received an order to secure the building and clean up the yard. Being the curious type, I decided to have run an associate run a title search on the property and I found out some interesting things.
The building, now controlled by the city and rumored to be in the middle of a lawsuit, sits on three individual lots all with leans on them. The assessed value by the city is drastically lower than the actual value of the building and annual tax on the building is just under $12,000 a year.
I enjoy the city taking a moment out its day to fix the broken windows and replacing them with brown painted wooden panels. If you had a chance to develop this property what would you do? How would you use this amazing building to improve the community?
Friday, July 11, 2008
I was watching a video over at Realty Times the other day and I ran across a video that really sparked my interest. The video talked about searching out student housing properties as a way to get through the real estate market slump.
Work and living in DC this video of course interested me considering all the universities we have. I started thinking about the pros to leasing to college students.
1: Short term Lease
Most of the students will be looking for a one year lease at best. This means the property can quickly be turned into a sale property if needed without too much difficulty.
2: Secondary Income Support
Most of your renters will be backed by the finances of their parents. This means the fear of renting to limited income parties can be avoided because their income is backed by their parents.
Just like any industry the best way to build new business is through referrals. Students are often your best referrals come from your previous residents.
4: Empty Buildings are Expensive Buildings
With laws changing and cost on the rise empty buildings can cost you in tax penalties and fines.
5: Renters can Turn Into Buyers
With the turnaround in this industry it is impossible to turn away a potential contact. Renters can turn into buyers just as quickly as you can turn a property around.
I am certainly looking at the bright side of leasing to college students. I figure it is easy to point out the negative but in this market finding the best possible solution to marketing your unit.
Have you leased out an investment property to students? Do you have any horror stories or experiences you would like to share? Let me know.
Posted by Anthony Lafauce at 5:23 PM
Thursday, July 10, 2008
The housing market is in trouble. We constantly hear of foreclosures, multi-million dollar buildings remaining vacant and home owners simply abandoning their homes. Atlanta has run into a different problem, multi-state ownership of buildings makes tracking down people who are legally responsibility for the property difficult. I came across an interesting article in The Atlanta Journal-Constitution about how Atlanta is combating this problem. Fine the listing agent.
Atlanta has been placing hefty fines on agents who represent buildings that incur code violations, back taxes, and unpaid utilities. To say the least this is ruffling the feathers of my Atlanta agents. The agents view this as an attack on already hurting industry, while the city sees the agent as the only person that legal action can be taken against. While I always enjoy reading a good news article, this story hits close to home because of the unique structure of the DC/MD/VA market.
As a city DC has a unique problem, its jurisdiction is a mere 10 miles across. Many of the property owners in DC don’t actually live in DC but can be found across the river in Virginia or located in Maryland. Everyone knows properties aren’t moving like they did a year ago and DC could face a similar problem with vacant properties or buildings that have numerous code violations. As a property investor it makes sense to sit on a property and let it incur violations.
Think about this from the developer’s perspective: my property’s value is at an all time low, I am probably not going to move my property for at least two years, if I sit on my property long enough the value of the property will be worth more than the total violations. There really is no incentive for a large property investment firm to worry about the violation fees.
Now think about it from the agent’s perspective: I try to move properties in a timely manner, I am concerned with all parties involved in the sale, I live in the city where I do business, my reputation is just as important as my results and I am legally bonded to any property that I represent.
Looking at these two logics it makes sense that cities would target agents instead of developers. The agent has much more to lose than the developer... But so does the city. DC is a city that needs development, around every turn we find vacant buildings and underline space, agents work WITH developers to help develop a city. If that city starts attacking its agents, even if the agent is a legal target, than the city runs the risk of driving out one of its strongest catalyst for development.
Currently Atlanta is setting the precedent for this imitative, I have not heard of any other cities trying a similar program, so we will have to watch these developments closely. With DC’s unique geographical/financial/political structure you can be assured that DC city government is also watching Atlanta right now. The real question is this: who is responsible and who will pay, the two aren’t always the same.
Take a look at the Atlanta article; let me know what you think. Do you think agents should be held responsible for the properties they represent? Will DC take a similar stance in the hopes of helping speedily develop the city? Do you think that this is a city’s attempt at attacking an easy political target? I would love to hear from you.
Posted by Anthony Lafauce at 12:09 PM
Tuesday, July 8, 2008
I was reading over a BusinessWeek article the other day and I came across an interesting stat. While the media is predicting doom and gloom for the housing market, DC is expected to have a 2.6% rise in home prices.
The causes for this rise are numerous and much like anything in the economy no one factor can say why homes in DC will cost more next year. The one economic stimulus that experts point to is the dependency of government jobs.
Typically in times of economic depression the government will see a flux in new hires from people looking for secure jobs and good benefits. Whatever the cause for the increase we can expect to see a nice little upswing in the DC market for home cost in the upcoming year.
What does this all mean for DC? A rise in the cost for homes could mean an increase in tax revenue for the city. More taxes could mean more city services (transit, police, fire). As fuel and living cost rise, cities with excess cash can position themselves to attract younger residents looking to enjoy life.
Community developers should be looking to create a lifestyle in their community, not just a place to live. Many of today’s buyers are looking for an exciting place to live, not just a place to live; walking to shops, casual eating and light entertainment will bring new buys in and make them stay.
If the cost of housing goes up in DC, and there is an influx of cash, urban developers should focus on creating communities that will attract buyers for years to come. It would be foolish of DC to pass up an opportunity to excel while other markets are stagnant.
With proper planning and superior execution DC can position itself as a city that lets people work and play in a safe and friendly environment. If the market predictions are right, and DC does see in increase in home coast and in turn tax revenue, what would you like to see the city do to improve the quality of life?
Monday, July 7, 2008
Since the baby boom of the 1950’s America has had a love affair with the suburbs. The dream of owning a 4 bedroom home with the white picket fence is so entrenched in the American lexicon that we refer to it as “The American Dream.”
Rising fuel cost, a housing boom that broke, and people demanding services has caused many young buyers to rethink The American Dream and consider moving into the city to satisfy their housing needs. Many urban planners in the ‘burbs’ recognize this and are prepared to do battle with urban living using the only tool they have… The Town Center.
Town centers offer the walking culture that many young buyers want; shopping, restaurants, entertainment and safety can all be found in the town center of many burbs surrounding DC. It is interesting to see where town centers work and where they don’t.
The Rockville Town Square is an interesting example of where the town center is not moving along as planned. When the center opened condos sprung up and restaurants moved in but people failed to show up. Slowly people are starting to show, but not at the volume that Rockville planned.
When town centers work they offer all the amenities of living in the city, while still living in the burbs. The problem is that town centers rarely offer employment options beyond retail. Many of the young professionals still have to work in the city even if they live in the burbs. Here in is the problem for many of the town centers. Work and play are still separate meaning that commuting cost remains. Hence young buyers apprehension to move out of the city.
There are plenty of examples where town centers work as a tool to anchor home buyers into an area. Do you know of any? What are some of the local town centers that you enjoy and would you consider moving somewhere because of the strong town center?
Tuesday, July 1, 2008
Definition: Buy and bail is the result of purchasing a new home with the intention of walking away on the old before the bank forecloses. For example, you owe $400k on your home and the identical property across the street is a foreclosure and is selling for $250k.
The legal stuff: It is considered mortgage fraud. Even extenuating circumstances do not give a home owner the right to commit mortgage fraud. The FBI defines mortgage fraud as, "any material misstatement, misrepresentation or omission relied upon by an underwriter or lender to fund, purchase or insure a loan."
The moral question: Is it wrong to purchase another home today when you have good credit and have been making current payments on time? The caveat - the identical property across the street is, for example, is selling for $250k and you owe $400k and are going to be foreclosed on anyway.
Reality: YOU TELL US
I just read an interesting article from CNN.com called 5 new rules for home buyers -
There's no guarantee that prices have hit bottom yet - but that doesn't mean that you can't get a great deal now...Especially in DC...
Rule 1: You can't time the bottom
Rule 2: One reason to buy now - mortgage rates
Rule 3: Another reason to buy - rates on big mortgages
Rule 4: Don't buy cheap; buy good schools
Rule 5: Make sure your agent has your interest at heart
And my personal favorite (and my own rule)
Rule 6: DC is becoming ever more affordable with all factors taken into account....
...with rising gas prices, longer commute times, falling home prices (and some good negotiating tactics from your agent), improving school districts, millions in commercial/retail real estate development - the list goes on - DC has become ever more popular in recent months for suburban families to pack up and move closer to their jobs, mast of which happen to be in DC. Why spend all of that time in the car in bumper-to-bumper traffic wasting gas with the A/C turned up barely crawling at 5-8 mph when you could wake up at the same time, walk to your local Starbucks, have breakfast, read the paper and walk to work all in the same amount of time. What do you think?