Category Archives: Homebuying Trends

Enclave of Sex Offenders a La “Arrested Development” = New Real Estate Reality?

FINGERPRINTRemember that episode of the popular TV series “Arrested Development,” where a member of the once-wealthy family tries to unload empty houses in their development by selling them to sex offenders?

If you laughed then, you now need to solemnly admire the show creators’ prophetic powers. According to Inman News’s reporting on this topic by Teke Wiggins, the increasing accessibility of data on where registered sex offenders live could ultimately “herd offenders into enclaves, depressing home values in some neighborhoods and scaring away families with children.”

Here’s a bit of the back story. All the relevant data – for-sale home listings on one hand, addresses of registered sex offenders on the other — has been available online (and as apps) for a while. (Federal legislation known as Megan’s Law mandates that each state collect information on registered sex offenders and make it publicly available, though many states specify that the public may access the information only for certain reasons, and not for others. California, for example, prohibits using the database for the purpose of denying housing.)

What’s new and different, however, is that various online services have begun merging all this data – although in some cases later “de-merging” it, as RealtyTrac (a major U.S. source of real estate listings) did, possibly in response to outcry from real estate agents and industry insiders as well as some legal issues. (See “RealtyTrac Wipes Hyperlocal Neighborhood Info From Listings.”)

You could look at RealtyTrac’s latest action cynically and say that the real estate industry doesn’t want to promote any feature, however snazzy, that puts “sex offender” warning flags right next to images of homes where prospective buyers might have hoped to raise children.

In the blandest economic terms, sex offenders in the neighborhood tend to depress home values. In fact, according to Wiggins’ article (“Sex offender data threatening home values, tarnishing neighborhoods and frustrating real estate agents”), knowing where a registered sex offender lived pushed down home values by 4% for those properties within a tenth of a mile of the offender’s house, in North Carolina’s Mecklenburg County. That data is from a study done by Jonah Rockoff, associate professor of finance and economics at Columbia Business School.

The direst of warnings came from real estate agent Steve Clarke who, reacting to RealtyTrac’s initial data merge, stated, “This could literally bring down property values all over the United States.”

Yikes. But doesn’t Clarke’s statement cut both ways? If the U.S. is littered with sex offenders, then shouldn’t home buyers simply realize that it’s nearly impossible to find an area where everyone is sane and harmless? You could move to a “sex-offender-free zone” and still find local folks convicted of various other crimes as well as crazy neighbors who have 25 cats.

I don’t mean to minimize the fear that a homebuyer, particularly a parent, might have when considering the prospect of living near someone with a history of sexual assault, rape, or other such offenses. But as Wiggins rightly points out, there’s a “potential for sex offender data to mislead and spook consumers.” He details a story in which neighbors were spreading the news that a local 17-year old was a sex offender – but it turned out that his offense was to have had sex – apparently consensual sex — with his 15-year-old girlfriend, after which the girl’s father pressed charges. (In some states, a conviction for consensual sex, that is, statutory rape, can result in a registration requirement.) The young man’s actions hardly seems like the sort that should inspire panic and bring down local home values.

Wiggins also notes that the accuracy of sex offender databases is questionable. Changes of address may not be entered into the database for some time, if at all. And offenders often fail to register.

After talking to some criminal law attorneys, I can add a few more reasons why prospective homebuyers shouldn’t stir themselves into a frenzy looking at sex offender maps:

  • A minority of sex offenders commit subsequent offenses. According to the Huffington Post, “Contrary to popular belief, as a group, sex offenders have the lowest rate of recidivism of all the crime categories.” (See “Sex Offenders: Recidivism, Re-Entry Policy and Facts.”)
  • Not everyone who is charged with a registerable sex offense will end up on the sex offender registery. A good defense attorney will do everything possible to avoid an outcome that requires registration, a life-long duty that will limit the client’s ability to get jobs and housing long after any jail time has been served. Particularly when the prosecution’s case is weak, clients will enter into plea bargains to lesser, non-registerable offenses, like assault.
  • The most common sex offenders are the people you might least suspect. According to the organization Parents for Megan’s Law, “Most child sexual abuse, up to 90%, occurs with someone a child has an established and trusting relationship with.” Friends, babysitters, family members, coaches, and others are commonly identified in studies and statistics of child sexual abuse.

Not all of the above news is exactly comforting. But it points to a larger truth: We can’t completely isolate ourselves or our children from danger – not in the homebuying process, nor anywhere else. The best bet for parents worrying about their children’s personal safety is to teach those children what to watch out for and encourage them to talk to parents or other adults about any inappropriate behavior.

Will a “Premiere Party” Help Sell Your Home?

mimosa iStock_000012039452XSmallThe trend-spotters at Oakland Magazine have been at work, with a recent article titled, “To Sell a Property, They Throw a Party.”

And not just any party: It’s a “premiere party” (usually for a luxury home in an affluent neighborhood), to which the real estate agent invites hundred of neighbors and other prospects.

They might serve champagne and hors d’oeuvres (will I ever be able to spell that without looking it up?) or perhaps chocolate chip cookies. They might create an art show with work from a local artist. One agent even commissioned a bagpipe player.

The odd thing is, most of the article discussed not what benefits parties like these offer the home seller, but what they can do for the selling agents, who — in the hot, hot, and already hotter Oakland market — find they’ve got to work hard to set themselves apart and attract clients. As one agent told writer Mike Rosen-Molina, “Listing agents are looking for tools that every agent might not have and ways to convince sellers to list their home with them.”

Okay, so do such parties really help sell your home? Especially given one agent’s acknowledgment that, “Buyers will see the home anyway; anyone looking won’t miss the property.”

The answer seems to be that such parties create a “buzz.” They get people talking, and create a sense that the property itself is an object of desire. And, while no agent quoted in the article came out and said this, buzz like this can lead to every seller’s dream: Offers over asking price, and possibly a bidding war.

 

 

Will This Year’s Real Estate April Fools’ Joke Be Tomorrow’s Listing Reality?

applesAnyone who didn’t read the “April 1″ dateline on Midwest Real Estate Data’s article called “MRED Makes Scents,” might have been shocked by this Illinois provider of multiple listing services’ announcement that it had “added a revolutionary new “Scent” field to all MRED property listings. The “Scent” field allows MRED agents to indicate the aromatic smell that prospective clients can anticipate when visiting their property.”

Meanwhile, just a couple of week’s ago — and not on April 1 — CNN came out with an article by Kieron Monk called, “Forget text messaging, the ‘oPhone’ lets you send smells.” That’s right, a new device (to be beta tested in July) will allow users to “mix and match aromas and then send their composition as a message, which will be recreated on a fellow user’s device.”

Just think, your real estate agent may someday send you a message saying, “You’ll love this house, just the place to bake a hot apple pie,” and then send you the corresponding aroma!

But is the oPhone going to be ready for the other most likely message? “It’s a fixer upper, but if we can pull up the cat-pee soaked carpets and give it a fresh coat of paint, I think you may have a bargain!”

Of course it will. The future is here.

Should Your First Home Be an Old One, or Newly Built?

Brick entryIf you’re thinking of buying your first  home. chances are you’re a member of Generation Y (born between 1977 and 1994), had a median income of around $73,600 in 2012, and are looking to buy an 1,800-square-foot home that will cost you about $180,000.

How’s the crystal ball doing so far? (Actually, those figures are based on a recent “Home Buyer and Seller Generational Trends” study by the National Association of Realtors.)

If those demographic descriptors describe you, you’ve probably already noticed that they are not, for the most part, within your control. The amount you’ll spend on a home, for example, probably depends largely on what you can afford and what’s available in your area.

But now we come to an important matter that IS within your control: Will you buy an older, previously lived-in home, or a brand-spanking new one, most likely in a development?

The differences may be larger than you realize: Older homes tend to be more solidly built, more affordable (though not always), and in established neighborhoods with grown trees and neighborhood character. Newer ones, however, offer the advantages of customizable finishes and features, adaptations to modern building codes and energy efficiency standards, and, because they’re often in communities run by a homeowners’ association, reduced maintenance responsibilities for the homeowner.

So, would you like to know what the other Gen Y homebuyers are choosing? (The drum roll, please.) The answer is: OLDER HOMES! Apparently for all the reasons just described. So if you have confidence that your fellow Gen-Yers know what they’re about, the decision has just been made for you.

But should it give you pause that the Boomers, just two generations up the line from you — who have already owned a home or two — are now mostly choosing to buy newly built homes? Apparently they got tired of all the maintenance as an older home starts to fall apart.

The real test would be, however, to ask these Boomer-buyers how they feel about their new home in a year or so. By then, they may be kvetching about how newer homes have thinner walls (“I can hear the neighbors’ TV!”), they can’t get a dog of the size they’d wish (because of homeowners’ association restrictions) and the hot tub leaks (hasty building with unqualified labor is epidemic in the new home world).

There’s just no perfect, obvious selection. To help you make that choice intelligently, see the articles on the “Choosing a House” page of Nolo’s website.

Huge Disparity in Home Affordability Across the U.S.

SFHow can an annual salary of just over $19,000 be enough to buy you a home in Cleveland, Ohio, while you’ll need a princely income of $115,510 per year to buy a home in San Francisco, California? Let’s just say that home prices, mortgage rates, and other economic factors vary tremendously across the U.S., as evidenced by a recent study by HSH.

The HSH study put together data on mortgage rates and median home prices in 25 of the largest metropolitan areas in the U.S., and calculated how much salary you would therefore need in order to cover the mortgage payments on an average home there. (And that’s before you start worrying about other costs of living, like local private schools.)

The results should make any Californian who doesn’t already own a home want to flee to another state. Not only is San Francisco absurdly difficult to buy into, but prospective Los Angeles homebuyers will need, on average, an income of $72,127, and San Diego homebuyers will need $81,570.

Even New York City starts to look cheap by comparison: An income of $66,167 gives you a shot at buying a home there, woo-whoo! And we can blame the dot-com industry for driving up rates in San Francisco, but why is Seattle, the home of Microsoft and Amazon, still affordable for folks with an income of $59,130?

No wonder the other big story in the San Francisco Bay Area is that rental rates are the highest in the nation. But if you need to buy a house in an expensive area, you’ll find useful information in the “Affording a House” section of Nolo’s website.

 

 

 

Joining the Crowd of Newly Built Home Buyers? Do Your Homework

valentines houseA couple of years ago, finding a newly built home to buy was as hard as finding an open seat in a nice restaurant on Valentine’s Day. The builders weren’t building, knowing that the buyers weren’t looking.

But last month saw a sharp spike in sales of new homes, according to estimates by the Mortgage Bankers Association (MBA).

A whole new crop of homebuyers may, for the first time, be considering the possibility of investing in a home that, at the moment, exists only in the form of a drawing on a map. It’s an exciting process — new-home buyers can often customize the place to their own wishes, from the layout to the counter tops to various amenities.

It’s also a time for caution. First, there’s the matter of construction quality. The model house in the development, if there is one, probably looks shiny, new, and perfect. But not every builder is attentive to quality, and some are more attentive to speed and appearance than anything else — leading to horrible customer surprises down the line, as described in Nolo’s article, “Newly Built Houses: Pros and Cons of Buying.”

Then there’s the fact that many homes in development — particularly, but not always, if they’re condos or townhouses — require all owners to join a homeowners’ association (HOA). That offers many advantages, such as someone to maintain common areas and watch over community quality and uniformity.

But it also means ongoing monthly dues, the possibility of expensive special assessments, and a level of control over your life that not even a landlord could exert. (“Sorry, your dog’s too big, you can’t fly that flag, and you can’t hang your laundry outside.”) For more on that, see “Homeowners’ Associations (HOAs) and CC&Rs: Know What You’re Getting Into.”

And when you’re done with all that reading, don’t forget to make those Valentine’s Day reservations!

You’re Not on TV: Look at More Than Three Homes!

Family TVAccording to real estate agent Jason Crouch (of Austin Texas Homes, LLC), real-estate-related cable shows like “House Hunters” “My First House,” and so on have had a noticeable effect on his home-buying clients’ expectations.

Not that he’s entirely complaining — he wittily titles his blog post on the topic, “I Should Probably Send Thank-You Notes to HGTV and TLC.”

The reason? These shows have managed to convince some buyers that they should make a decision after visiting three, or at least a small handful, of homes. Says Crouch, “Needless to say, I appreciate the idea that we don’t have to visit a virtually endless number of homes to make a solid decision.”

Indeed, some home buyers — pre-HGTV at least — are known for driving their real estate agents crazy with their “This one’s too big,” “This one’s too small” syndrome. They never manage to find (or, if it’s a couple, agree on) a home that’s “Just right.”

But visiting only three homes? That’s got to be a sign that TV is rotting people’s brains.

After so small a number, you’re only just starting to get to know your local market; to get a sense of what’s available at what price. You’re only looking at a small slice of what might be available within your time window. Ask your real estate agent — he or she probably already knows of homes that will be coming onto the market within the next six or so weeks. You’re putting on blinders with regard to the biggest financial decision you might ever make.

So rest assured, the cameras aren’t rolling, and your real estate agent will happily visit more than three homes with you. (And by the way, how often have you watched “House Hunters” and thought, “Gee, I wouldn’t have wanted any of those homes!”)

 

Not Buying a House Is Okay, Too

mens roomsEvery once in a while, a journalist asks me to make the “case” for homebuying. That shouldn’t surprise me: I write books about homebuying, I own a home, and I love walking neighborhoods and looking at homes. I even have a little collection of tin houses sitting on my office shelf.

But let’s get one thing straight: Loving houses doesn’t mean I’m an “advocate” for buying one. It’s a lifestyle choice, and the financial outcome is anything but guaranteed. Some people can (with the right landlord) be perfectly happy renting their whole lives. They’re mobile, they can enjoy weekends free of home repair obligations, and if the place gets seriously damaged, they won’t be the one calling the insurance company.

Why am I bringing this up now? Because panic levels seem to be rising right along with interest rates, additionally fueled by headlines like, “Families Blocked by Investors From Buying U.S. Homes.” (This article makes the point that, with rising demand for rentals, investors are moving in with all-cash offers that individual buyers can’t match.)

So let’s refocus on other voices in the media, such as that of Kelly Phillips Erb, in Forbes, with “11 Reasons Why I Never Want To Own A House Again” and Carl Richards for The New York Times, in, “It’s Not Everyone’s Time to Buy a Home.” They discuss varied reasons not to buy, from the amount of interest you’ll plunk down to the fact that you are the only true expert when it comes to your own life.

If you decide to keep renting (and I’m not advocating for that, either!), the most important thing to do is understand your rights as a tenant.

Floodwaters May Not Be Rising Yet, But Flood Insurance Rates Are!

floodNo one can say FEMA didn’t warn us. Its website offers pages of information about how flood insurance rates might go up in 2013 due to the Biggert-Waters Flood Insurance Reform Act of 2012. Every homeowner’s case is different, but in extreme cases, FEMA projected that individual premiums could go up to $20,000.

(By the way, could you get a more perfectly ironic name for a flood-related law? It’s named after its Congressional co-sponsors, Rep. Judy Biggert, a Republican from Illinois who is no longer in Congress, and Rep. Maxine Waters, a Democrat from California.)

Until recently, this law attracted little public attention. But October 1, 2013 marked its first actual effective date.

The results aren’t pretty. Nor are they surprising, given that the purpose of the law was to put the National Flood Insurance Program (NFIP) on a firmer financial footing by, among other things, raising insurance rates to reflect true flood risk levels. For example, homes whose lowest floor elevation is below the Base Flood Elevation (BFE) will no longer receive subsidized rates, and homeowners who were grandfathered in under old flood maps will no longer be able to take advantage of this.

Now we’re hearing that even Congresspeople who voted for the law are worried about how it will impact some homeowners. Homeowners themselves are complaining; The New York Times reports “rallies, petitions and concern among state governors.” And real estate agents report home deals falling through when the new owners get a look at the new price tag for insurance.

Some members of Congress are, in fact, looking into ameliorative or delay measures. (If there’s anything Congress is capable of doing effectively, it’s delay!)

In the meantime, if you’re buying a home, you might want to add an insurance contingency to your contract, specifying that closing be made conditional on obtaining acceptable insurance coverage. See Nolo’s Essential Guide to Buying Your First Home for details on contract clauses,  insurance and other aspects of home buying.

Yes, It’s THAT Shiller Who Just Won a Nobel in Economics

Macro of sparkling champagne against black backgroundAnyone who follows the real estate market has probably heard of the “Case-Shiller Index,” known for “tracking changes in the value of residential real estate both nationally as well as in 20 metropolitan regions.” Its findings are widely reported on, as are the thoughts and conclusions of Robert Shiller himself, who warned the U.S. of the pre-2008 housing bubble many times over. (Well, at least he was wrong about that. Oh.)

So yes, this is the very same Robert Shiller who was recently named as one of three co-winners of the 2013 Nobel Prize in Economics. When you hear blurbs about his study of when “assets are overvalued,” real estate is one of the assets being referred to.

Now that his credibility just got gold-plating, what does Dr. Shiller have to say about where the housing market is going next? Actually, he’s worried that prices in some markets have risen unrealistically high — creating a “bubbly” situation, according to a Reuters report. Let’s hope that’s just the celebratory champagne talking.