Skip to main content

Tag: real estate

Castles in the Sand

A group home by any other name

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

A group home is defined as a small number of unrelated people, in need of support, living together. This may be the long-established definition, but in today’s unprecedented real estate environment it may have taken on an expanded definition.

It would be redundant to say that real estate values on Anna Maria Island have increased to an extraordinary level during the past few years. Second-home buyers who have flocked to Anna Maria for decades are finding they can’t afford or justify the expense of purchasing a home to use for just part of the year. To fill this opening there is a new homeownership concept – or maybe just a jazzed-up version of an old concept.

Co-ownership is a new model conceived by a California company called Pacaso. The idea is to bring together co-buyers in a luxury home they would not ordinarily be able to afford, to use on a rotating basis as a second home. The process, according to them, is straightforward. Pacaso acquires private homes in upscale vacation residential areas and structures them as eight-member LLCs. Buyers then purchase an ownership interest in the home, ranging from one-eighth to one-half of true ownership of the property.

One of the selling points is, of course, a much smaller investment in the property and no responsibility for maintenance, which is managed by the company for an additional fee. They also make the point that second-home owners frequently don’t use their full homeownership up to the level they had anticipated and have tied up millions of dollars in assets that are no longer liquid.

The regions that Pacaso is active in are, not surprisingly, the high-end markets of Miami, West Palm Beach and Fort Lauderdale in Florida and posh areas of Colorado, California and Utah. They are investing in multi-million-dollar homes that offer amenities most second-home buyers could not afford on their own. One of the typical properties on their website in Fort Lauderdale was a $6,000,000 waterfront property with six bedrooms, seven bathrooms and more than 5,000 square feet. The one-eighth ownership was $895,000 and additional fees were not indicated. This would give you part ownership that you could use for a month and a half every year. How you determine the months was also not indicated.

Even though they say that co-ownership is not fractional ownership, which has been around for a long time, some of the elements are the same, like having your name on the deed. This is entirely different from timeshares, which is buying the right to use the property but without ownership rights. And, of course, many buyers and family members do get together and purchase homes jointly and manage it themselves. But for those second-home buyers who do not have relationships that will enable them to do this, co-ownership managed by a corporation fills that gap.

So, does Anna Maria want this type of ownership on the Island? My guess is no, as residents of Napa Valley in California also don’t want it. Homeowners there have organized and made it very uncomfortable for Pacaso to operate. They are confronting potential buyers and have attempted to pass regulations to control co-ownership purchases.

Nevertheless, don’t be surprised if Pacaso or some other co-ownership company starts to buy up our multi-million-dollar properties to sell as co-ownerships. In my opinion, it would be another negative slap in the face for Anna Maria. If it happens it will be very gradual, before anyone knows what’s going on. So stay alert – the concept is really just an extravagant group home.

Castles in the Sand

East county developments will add to Island traffic

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

After more than 20 years of living in Florida, I no longer look for vacation destinations that involve beaches and water views. People who have lived north for most of their lives become obsessed with the weather and beach proximity in their travel destination, but for me, it’s the last thing I consider when I travel. I figure that as long as it’s not snowing and the temperature stays above freezing, I’m fine. However, for most of the world, a beach vacation is at the top of their list, and as we all know, Anna Maria Island and the entire coastline of Florida has some of the best in the world.

Travel & Leisure Magazine did a study of the most charming small towns in Florida. Anna Maria Island came in second, and they noted that it’s the best kept secret in Florida. Really? Have you noticed the traffic filtering onto the Island from both bridges recently? No secret about that. Nevertheless, since Palm Beach Island came in number one, I figure we’re in good company with more affordable restaurants and more accessible beaches.

Just when you think we’re done with all these crazy travel rankings, inflating prices, traffic and beach blanket congestion, another one pops up. This time it’s a travel website called Holidu.com, a search and booking website for vacation rentals – again, just what we need; more rental publicity. Holidu.com declared that Coquina Beach is number four in Florida for 2021. They point out the ubiquitous aqua blue waters, picnic areas, availability of fast food and cold drinks. They forgot to mention the snail’s pace going over the Cortez Bridge and lack of parking once you get there. Our only hope is that Siesta Key, which came in number one, will draw the out-of-town crowds and keep them off our “pristine” beaches.

Now that I’ve had my little vent, we can talk about real estate. Those of us who live far west in Manatee County may think what goes on further north and east doesn’t affect us, but unfortunately it does, and in a very serious way. The most recent plan currently being evaluated by the county planning staff is for the first phase of construction of a 288-acre multiuse development at the northern entrance to the county.

Robinson Gateway in Parrish is being planned for the northeast corner of Interstate 75 and Moccasin Wallow Road. The plan is for 542 residential units, 900,000 square feet of retail space, 600,000 square feet of office space, a 1,750-seat movie theatre and 350 hotel rooms in addition to about 40 acres of open space and parks. This is on top of the North River Ranch development already under construction with 6,000 homes planned.

County planners are naturally genuinely concerned about the traffic that all of this new construction will generate. I’m concerned about the amount of traffic all of these new residents to Manatee County will generate when they discover our beautiful beaches that everyone else in the world seems to know about, our small-town vibe, unique shops and trendy restaurants.

I guess progress can’t be stopped, but it still makes me sad that our little world is rapidly changing. As far as travel, I actually welcome the change from warm sunny days to chilly gray skies; it makes me grateful for Florida weather when I return home. And that, of course, is the problem. Everyone loves warm weather and sunny skies, and will continue to seek it out.

Castles in the Sand

Privacy and low inventory

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

When you purchase a home, it’s inevitable that you lose some privacy. Property purchases become public record and most counties in the United States make databases of these purchases available on their local websites.

This is the reason that celebrities and high-profile buyers like politicians and the very wealthy frequently purchase their personal property in a limited liability company. LLCs aren’t foolproof in shielding personal identities because of new laws designed to disclose who the actual buyer is in an attempt to curb money laundering. But for the average curious neighbor, it does make it a little more difficult to determine who, exactly, is the real owner.

So how does the desire for privacy impact the current shortage of available properties to purchase? Well, an old real estate tool called a pocket listing is becoming very popular again. A pocket listing is a property listing that is not placed in the local multiple listing system for any broker to show to their clients; rather, the listing agent and their broker keep the listing in-house, showing it to a small group of potential buyers.

Although there is nothing illegal about this way of marketing a property, because of the increasing number of brokers using this method, the National Association of Realtors adopted a rule last year aimed at discouraging its use. The new NAR policy requires agents to add a listing to their local listing service within a business day of publicly advertising the listing. However, listings can still be kept off the database if they are only shared within one brokerage, essentially an office exclusive.

Small, independent brokers argue that this gives a huge benefit to big brokerages that can make properties available to a larger number of in-house agents.

This is starting to affect the number of properties available for sale in an already low-inventory market. In Tampa, for example, the proportion of estimated pocket listings rose to 6.1% from 4.4% two years ago.

The argument against pocket listings is, of course, that buyers do not have all of the properties on the market available to them, pushing the prices up even more for the remainder of listings.

The argument for pocket listings is that sellers who prefer a more private choice when selling their home have the option of pre-qualified buyers who have already been screened. Pocket listings also eliminate some of the frenzy that is defining this market with bidding wars and dozens of showings.

The National Association of Realtors reports that home sales fell 2.7% in April from March and that April was the third straight monthly decline – the longest since last spring. In addition, the median single-family home price nationally jumped to $341,600 in April, the highest on record. Manatee County also experienced the highest median sale price on record for the month of April at $405,000.

I see it both ways. Sellers should be entitled to list their personal homes any way they want in order to maintain their privacy and sanity. However, when you look at the numbers, you can only feel for the poor buyers who are not only working against cash buyers, low inventory and high prices, but now with private listings increasing, having even fewer properties to tour.

Unfortunately, things will only get worse before they get better. Sellers want to maximize the profit in their property while still keeping their privacy, and buyers are at a loss of what to do next. What a year. Stay safe.

Castles in the Sand

It’s worth the stretch

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

A very wise real estate broker I was fortunate to meet more than 40 years ago not only got me interested in selling real estate, but also gave me great advice about buying as much house as you can possibly afford. In a fundamental way, it changed my life, pushing me to buy a home I loved but thought I couldn’t afford.

Today’s millennials are facing the same decisions my husband and I made all those years ago. Should we take the leap into homeownership, spending more than we ever thought we would, or should we play it safe?

As difficult as it is for buyers to find a home in this market, if you do find one and it’s over the top of your price point, don’t discard it. My rule of thumb is if a lender thinks you’re qualified, believe them, even if your parents and friends think you’re nuts. Get into the game now and you’re set for the next 30 years and you won’t be at the mercy of landlords.

Generally, lenders are qualifying buyers based on between a quarter and a third of their monthly gross income on the monthly mortgage payment. That range increases to between 35% and 45% of your monthly gross income if you include maintenance, taxes and insurance. Credit scores are still very important in analyzing credit worthiness, so be ready in the event you have anything on your credit report that is incorrect or needs an explanation.

Finally, first-time buyers are frequently short on cash and may opt for a mortgage down payment of less than 20%. If you are considering this, don’t forget that you will be required to pay mortgage insurance, which will cost from $30 to $70 a month for every $100,000 borrowed. This insurance is for the protection of the lender should you default on the loan before there is a sufficient build-up of equity. It will stay in effect until you have paid enough of the principal to equal equity in the amount of 20% of the home’s value. Also, the mortgage insurance payment will count towards your monthly costs and will be included when qualifying for a mortgage.

Historically, mortgage rates are very low and housing costs are very high. But should buyers sit out the market waiting for prices to come down? Good luck with that; the only time home values went down was after the financial crisis, which was generated by risky mortgage lending and exotic mortgage programs, all of which have been corrected through legislation passed after the crisis.

Even if buyers end up with a mortgage payment they are not totally comfortable with, it’s likely they will grow into the payment. As younger buyers establish careers, the anticipation is their income is likely to rise over time, so while you’re stretching to make those early monthly payments, you’re building equity and long-term wealth. Young buyers also should not discount the psychological benefits of owning a home of your own – pride of ownership, family building and becoming part of a community have real-life benefits.

Playing it safe turned out not to be in my playbook, so thank you, June, for confirming what I already knew. As my mother always said, paying rent is throwing money away, another wise woman. Go for the stretch, you 30-year-olds; you’ll look back on it as one of life’s pivotal moments. Stay safe, we’re almost there.

Castles in the Sand

Crazy rich homeowners

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

We’re in the “careful what you wish for” zone, not just Floridians, but every homeowner across the country. Prices are up, inventory is low and a lot of potential buyers are really unhappy; where will it end?

Home prices rose around the country during the first quarter of the year to a record level. The median sale price for existing single-family homes was higher in the first quarter compared with a year earlier for most of the metro area tracked by the National Association of Realtors. They reported that in 89% of the metro areas tracked, median prices rose by more than 10% from last year.

In addition, the National Association of Realtors reported the United States average median single-family home appreciation rate was up 16%. The following are first-quarter median single-family appreciation rates for some of the major areas around the country: Northeast up 22%; West up 18%; South up 15% and Midwest up 14%. This may be a confusing mouthful, but it boils down to no matter where you live or are trying to buy a home, you’ll pay a lot more than last year.

Realtor.com also reported the number of active listings on their website was down 52% from a year earlier at the beginning of May. The fact that mortgage rates are low, even though they did have a slight blip up, is not significant in some areas since all-cash buyers are representing a large slice of buyers. And Fannie Mae is forecasting median existing-home prices to rise 11.5% in 2021 then slow to a 4% increase in 2022, none of which is good news for buyers who are getting priced out of the market every month. Not to mention lenders who are less than enthusiastic about giving mortgages to first-time borrowers, especially if their credit ratings are less than very high 700s.

Before I go into Manatee County’s April sales statistics reported by the Realtor Association of Sarasota and Manatee, comparing April of last year to April of this year will show remarkable changes because April 1 of last year was the beginning of the COVID-19 lockdown and a pause in real estate sales. Regardless, the numbers are incredible, breaking yet another record for single-family median sales price.

April single-family closed sales were up 69.7%, cash sales were up 166.7% and the median sale price was $405,000 up 19.1% a new record. The average sales price was $578,162, up 42.2%, the median time to contract was seven days and month’s supply of available properties was 0.6 months.

April condo closed sales was up 126.8%, cash sales were up 121.7% and the median sale price was $235,000, up 10.8%. The average sale price was $303,121, up 28.9%, the median time to contract was 11 days and month’s supply of available properties was 0.7 months.

Make note of the cash sales, which keep going up every month. That number is having a significant influence on the market. First-time buyers are not only being outbid they are also being outmaneuvered by cash buyers and quick closings, frequently without an inspection contingency.

Every month, it’s hard to believe the numbers can improve as much as they do. But we are in real estate crazy land, something we all at one time wished for. Nevertheless, keep in mind that comparisons will be off for the next several months when you compare them to last year because of last year’s lockdowns. Stay safe.

Castles in the Sand

The never-ending saga of Florida insurance

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Like a bad soap opera, the Florida insurance storyline keeps repeating itself. This time it’s not even flood insurance, which I touched on two weeks ago; it’s your regular homeowner’s insurance that is breaking hearts all over the Sunshine State.

Here’s an interesting little fact; Florida is the most expensive state in the United States for home insurance, according to the insurance trade group Insurance Information Institute, and premiums are going up. Florida residents are projected to pay on average $2,380 in premiums this year, a 21% increase over 2018. The average American homeowner is expected to pay $1,297 this year, up 4% from 2018.

Some of the reasons Florida’s premiums are going up have to do with claims resulting from two hurricanes, Irma in 2017 and Michael in 2018. As we Floridians know or should know, even if we don’t take a direct hit from a hurricane, no matter where it hits in the state, we’re all subject to increases in insurance. Adding to payouts for storms, there is an increasing amount of litigation over insurance claims and sham roof-related claims, as well as increasing rates for reinsurance insurers to mitigate some of their risk.

The end result of this is insurance carriers experiencing mounting losses and increasing premiums or dropping coverage completely in certain areas. Some homeowners are being forced to go to Citizens Property Insurance Corp., the state-backed insurer of last resort, which is quickly increasing the number of policies they carry. We’ve been down this road before with flood insurance; in the end, it’s the Florida taxpayer who gets hurt.

What we don’t know at this point is if it will have any effect on the real estate market. Florida residents and out-of-state buyers are reeling from sticker shock, but will that translate into a cooling of the blow-out real estate market we’re in? My opinion, for what it’s worth, is it won’t have any significant effect on the value of the real estate market. Individuals relocate to Florida and continue living here for reasons other than insurance premiums. In all respects, Florida is a low-tax state with so many other benefits driving up the population I doubt an insurance increase will change too many minds.

Florida lawmakers have been attempting to change some legislation to help control the growth of insurance premiums with bills that put limits on attorney fees and frivolous lawsuits and claims, hopefully reducing the incentive for homeowners to go forward with false claims.

And all of this is happening at the same time we can expect flood insurance increases in October. FEMA is reviewing its national insurance program. It is estimated that one out of five Florida homeowners (19.8%) should see a decrease in their yearly flood premium. However, one out of 25 (4.2%) should see a yearly rate increase greater than $240. We’ll know more at the beginning of October.

I personally had about a 15% increase when my homeowner’s policy renewed a couple of months ago, and what I hear from other people is about the same. Will it drive anyone out of Florida? I don’t see that happening. When the flood insurance increased several years ago there was a momentary panic, but it evened off when the federal government made some changes, and it had no effect on the real estate market.

There’s always something as the world goes round. Stay safe.

Castles in the Sand

Governments change; so do taxes

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

There always seems to be something to talk about as it relates to taxes. Tax liability for real estate investors and individual homeowners is continually changing, especially when there is a change in government.

This time is no different.

I’ve written a few times about a 1031 exchange, which is a way to defer the capital gains on the profits from the sale of property by “exchanging” the property. Basically, this allows you to reinvest the proceeds from your original property and subsequently defer the capital gains if another property is purchased within six months of the sale. This tax benefit is, however, only eligible for either investment or second home properties, not for a primary residence.

During the last tax overhaul in 2017, some of the benefits of the 1031 exchange were rolled back. Properties could be exchanged for “like-kind” properties including artwork and valuable collectibles, however, that part of the law was amended to allow for only real estate to be recognized as an exchange.

The 1031 exchange has traditionally been used by corporations, small real estate investors and individuals alike. Real estate investors take the position that exchanges encourage businesses to expand and create jobs. Individuals use the exchange as a way to roll over their second home properties into larger family homes and then pass them on to their heirs without paying the capital gains accrued over the years. In fact, most 1031 exchanges are done by individuals rather than corporations.

Now as part of the Biden administration’s proposed new economic plan there will be a further reduction to the benefits of the 1031 exchanges. The proposal would abolish 1031 exchanges on real estate profits of more than $500,000. This would probably eliminate the benefit to corporations to use the exchanges, but still allow benefits for individuals and small investors. As always, everyone’s tax liability and positions need to be reviewed by professionals in the field.

There is no question that this has been a tax loophole since 1921 and this isn’t the first time the federal government has had its eye on it. I do, however, question how much benefit there will be left for individuals and small investors if the price of properties continues to skyrocket.

And, while we’re talking property values, there was an Emerging Housing Market Index published at the end of April by The WSJ/Realtor.com organization. The index ranks the 300 biggest metro areas in the U.S. based on economic health and lifestyle data, including unemployment rate, wages, commute time and small-business loans.

Out of the top 50 metro areas, the only one in the state of Florida was the North Port-Sarasota-Bradenton region, coming in at number 47. It’s an interesting list to look at if you follow real estate trends and how they may have changed in the past year. Coeur D’Alene in Idaho came in first, followed by Austin, Texas and Springfield, Ohio. The only areas in the northeast were two upstate New York regions – Rochester and Buffalo – and one in New Jersey, in Trenton. The index points to the metro areas where homebuyers are seeking an appreciating housing market and appealing lifestyle with amenities.

Keep your eye on the new proposed economic plan by the federal government. There may be other proposals tucked in the legislation that could affect the real estate market. Also, keep your eye on the emerging markets around the country. COVID-19 has changed many things this past year and real estate is definitely at the forefront. Stay safe.

Castles in the Sand

Good grief, it’s almost hurricane season

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Let me be the first to welcome you to the 2021 North Atlantic hurricane season. Technically, it doesn’t start until June 1, however, based on what we lived through last hurricane season in the middle of a 100-year pandemic, you can’t start too early to prepare.

On April 8, Colorado State University released its predictions for the 2021 hurricane season, predicting an above-average season with 17 named storms, eight hurricanes and four major hurricanes. The average hurricane season is considered 14 named storms, seven hurricanes and three major hurricanes. In addition, the National Hurricane Center will begin tropical storm warnings this year on May 15 just to add a couple of more weeks to our “cone” watching.

And we have a new list of names – one of the things I always look forward to. We start with Ana, then Bill, Claudette, Danny and Elsa for the first five. Wanda is the last and none of us ever wants to see the Greek alphabet again in our lifetime.

By now, even if you have only lived through one hurricane season, you know what to do. Last May, I said that preparing for hurricanes was the exact opposite of preparing for a COVID-19 lockdown in many ways. At the beginning of hurricane season, we clean out our freezers in preparation for losing power for an extended period, as opposed to the beginning of the COVID-19 lockdown, when many of us filled our freezers so we didn’t need to do too much big-store shopping.

However, both natural disasters still require stocking up on non-perishables, water, batteries, canned goods, don’t forget the manual can opener or buy pop tops, ice to get you through a few days, full gas tanks and prescriptions for you and your family.

Now is also the time to think about those window and door coverings if they’re old and vulnerable to high winds. Start planning on where you will move outdoor furniture, plants, awnings and other objects that can become flying missiles in a storm. Boats in the water that can’t be moved to dry storage need to have their lines doubled up and extra lines added.

The mymanatee.org website has a lot of detailed information concerning disaster kits and important papers that should be in a place that can be quickly accessed if you need to evacuate. Also, know where your local shelter is. Even though you think you’ll never need a shelter you may be surprised; I was during Hurricane Irma.

Since flooding goes along with hurricanes, understand which flood zone you live in and even if not required by a lender, purchase flood insurance. The Federal Emergency Management Agency (FEMA) manages the subsidized program and it’s a prudent investment for all homeowners.

Speaking of flood insurance, FEMA announced an overview of flood insurance premium rate increases that will go into effect on Oct. 1 of this year. This increase was delayed from last year after the agency received pressure from Congress to delay the increases. Keep in mind that Florida is in the crosshairs of FEMA, which always runs a deficit since 35% of their policies are in the state of Florida. More about this as we get closer to the October date.

Since I welcomed you to hurricane season, I hope I can also be one of the first to say on Nov. 30, thank goodness it’s over. Be prepared, and we’ll all get through another year together. Stay safe.

Castles in the Sand

Foreclosure in the time of COVID-19

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Foreclosure has taken on a whole new meaning this past year. Yes, your home may be in foreclosure or approaching foreclosure because of job loss impacting your financial situation, but you could also apply for forbearance, temporarily suspending your mortgage payments and stopping the foreclosure process. Now that the initial 360-day program for government-backed mortgages is over, there have been extensions to the program and more are ­being proposed.

As of now, the government has extended the moratorium through June. Also, the Consumer Financial Protection Bureau in the early part of April proposed a rule that would prohibit foreclosures through December. They also want to give servicers of the mortgages options to help streamline loan modifications with COVID-related hardships, as well as keeping borrowers informed of their options. The question is: Do moratoriums and extensions really help, or as we start to dig out of COVID and people return to work, are these programs just delaying the inevitable for homeowners and distorting the housing market?

That said, there are millions of homeowners who have benefited from the extension programs and have sought mortgage payment relief or forbearance. According to the data from Black Knight, as of March 2021, approximately 2.6 million homeowners remain in an active forbearance plan. For those and others, the Consumer Financial Protection Bureau (CFPB) has information on its website to help homeowners determine and understand their options.

Some of the options available to homeowners who are ready to begin making their monthly mortgage payments again are:

  • Reinstatement, which allows homeowners to pay any missing amounts all at once.
  • A repayment plan, enabling homeowners to resume making their regular monthly mortgage payment plus an additional portion of the missed amount each month until the missed payments are paid off. Don’t forget that these suspensions were only temporary – the missed mortgage payments still need to be repaid.
  • Payment deferral, for those who are unable to reinstate or who can’t afford a repayment plan but can resume their monthly mortgage payments. This defers any missed payments to the end of the loan term when it is paid off. Interest is not charged on the deferred amounts and is due upon sale of the property.
  • Loan modification, to change the original loan terms, like the interest rate or term of the loan, to permanently change the mortgage and make a homeowner’s monthly mortgage payment more manageable moving forward.

As always, my concern is the overall housing market. Although all of these programs have helped millions of homeowners, I question how they impacted the shortage of homes on the market we’re experiencing now, pushing values up to an unaffordable level for the next generation of buyers. Are homeowners not selling because they have no incentive while they aren’t paying their monthly mortgage in homes they will probably have to eventually sell anyway? With the jobless rate down to 6% from a high of 14.8% and employers having difficulty hiring new staff, in my opinion, it’s time to get the housing market back to normal.

In addition to homeowners, renters have received a fair amount of benefit from the original Cares Act with a 120-day moratorium on evictions, which has also been extended through June. However, homeowners who are also investors and landlords are having big financial issues keeping up with their expenses.

As we in Florida experience a blow-out real estate market, please remember that many homeowners around the country are still finding a way to dig out. The federal government has offered substantial help in this area and now it’s time for homeowners to remember the real meaning of foreclosure. Stay well.

Castles in the Sand

Priced out of single-family homes? Try a condo

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

It’s wild out there, and if you read my column last week, you’ll understand just how wild it is. The value of homes on Anna Maria Island is soaring, and it’s not uncommon to see listings not just over $1 million but also $2 million, $3 million and $4 million. Last week, I even reported $5 million and $6 million sales or listings on the Island.

So, what’s a person to do? Most of the high-end properties are single-family with some high-end condos mixed in, but maybe the way to get on the Island near the water in a more affordable price range is to take condo living more seriously.

In the waterfront areas that I report on, Cortez and the three cities on Anna Maria Island, there are several condo communities, some with excellent waterfront, water view or water access with close proximity to the beach. Condos generally are priced lower than single-family homes in these areas and may give you a greater bang for your buck. But the real question is, are you a condo person?

I’ve written about condo living before, but at this point in time, it seems to be even more important to buyers who are priced out of single-family homes. It’s not that complicated and, in many respects, more advantageous to own a condo – especially if it’s a second home.

First of all, if you have never owned or lived in a condo association, you have a lot of research to do, starting with a lack of privacy. Not everyone is comfortable with someone living over their heads or on the other side of a common wall. Getting your newspaper in the morning could be embarrassing if you’re not appropriately dressed and it’s time for Fido down the hall to go for his morning walk. And, while we’re on the subject of pets, how do you feel about pets in close proximity to where you live? There are condos that have pet restrictions including no pets, small pets or a cap on the number of pets – something else to research.

Condo ownership is very much like communal living. A board of directors makes a lot of decisions that could affect your lifestyle and finances. Not that you can’t have a say in the operations of the association, but, as in most communal situations, the majority rules. There are rules and regulations that may or may not be a problem for you. For example, your teenage grandchildren visiting and using the pool after hours or hosting parties may guarantee you a letter from the association.

Of course, the advantages – especially for part-time residents – is walking out your front door and not worrying who’s cutting the lawn and cleaning the pool for several months. Association fees will cover all maintenance and repairs in regular condos; townhouse condo owners could be responsible for a larger share of the expenses. In addition, insurance and the all-important flood insurance for the association are paid for in the maintenance fees, therefore, you only need to carry a homeowner’s policy for your individual unit.

Life is always a compromise, and if you can’t find what you want within your price range in a single-family home, consider looking at condos even if you never thought you were a condo person. Granted, you have to assume you will have limited control, but if you can adopt a “live and let live” psychology you will be just fine and eventually learn to love the freedom. Stay safe.

Castles in the Sand

Look before you leap

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

In case you haven’t noticed, there is a pandemic housing fever going around the country. This is putting a lot of pressure on buyers to buy fast, buy online, compromise, and – probably the biggest mistake – not research locations they’re not familiar with.

Houses, like so many other shiny objects, are emotional purchases, but unlike jewelry, electronics and clothing, they can’t be returned the next day. Even emotional purchases of cars could give you a way out after a few months, but houses are a lot more complicated.

Because of this frenzy, many buyers are living in homes in areas they learn to hate in a very short period of time. They have faced engineering issues not disclosed or easily seen and many have overlooked potential risks in an effort to get to the finish line before someone else does. Waiving inspections is one of the biggest mistakes motivated buyers will make in order to make their offer look better than the competition, but that could lead to costly repairs down the road.

Another big mistake COVID buyers are making is relocating and buying in an area they’re not familiar with. Think of a buyer from, say, low-humidity California or Nevada who falls in love with Anna Maria Island. If you’ve never lived in a humid environment close to or on the water, the concept of mold, dampness and peeling paint could come as a shock – not to mention salt-encrusted windows. Worse still is a city dweller who runs to the country or suburbs during the height of the virus infections and discovers a couple of months later they hate the culture, miss the activity and wake up one day and have no idea why they’re there.

A lot of this frenzy is fueled by the ability to shop online, make offers and close properties without ever stepping foot inside. Online homebuying has picked up speed at an extraordinary pace this past year and so far is not showing signs of slowing. There has been a widespread adoption of tech tools that allow buyers to not just browse real estate but also apply for loans, finalize transactions and even have documents notarized. This is becoming the new normal, especially for millennials who are tech-savvy and not intimidated by sending all their savings to the cloud or some other virtual entity.

Want to know how widespread this is? Look at these statistics according to Redfin, Realtor.com and Zillow.com: 63% of buyers in November and December made an offer on a house they hadn’t seen in person; 41% increase in traffic on Zillow searching for sale listings compared to a year ago; and 63% of millennial homebuyers say their home search is motivated by the fact that they are now working remotely.

Adding to the ease of choosing a home online, Zillow and Realtor.com recently rolled out new interactive home tours. The new home tours are 3D with really exciting imagery and the hope is to provide a better alternative to the existing prerecorded video tours. It gives you the ability to click on a particular room and move about the room at your own pace, and one of them even gives you a bird’s eye view of the interior of the property and the ability to have floor plan interaction. I noticed some of the Island real estate brokers have this new technology attached to their listings, and I expect to see many more in the future.

We’re living in a new world for many reasons, and home buying in particular has changed drastically in the past 12 months. Nevertheless, don’t let the COVID buying fever force you into something you’ll regret. Fevers are bad – both COVID fever and COVID homebuying fever. Stay safe.

Castles in the Sand

Bubble, bubble, toil and trouble

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

If you think Macbeth’s witches had trouble, just wait. If the COVID-19 housing bubble bursts, it could be a replay of 2008.

To be fair, not everyone thinks there is a bubble. Many real estate professionals and economists feel there are plenty of new buyers in the real estate pipeline to keep the market rolling along, not to mention the low interest rates. But where, exactly, are we compared to the housing bubble in 2008 that led to the financial crisis? Well, there are some similar aspects, but a lot of different dynamics as well.

The banking giant UBS claims home prices are outstripping both wages and rents. While home prices have appreciated more than 60% since November 2012, incomes have only appreciated by 20% and rents by 30% over the same time period. However, unlike our previous real estate bubble, this time it is not being fueled by a breakdown in lending practices because of a combination of bad legislation and lender and investor greed.

Once the lending standards by the government-controlled agencies of Fannie Mae and Freddie Mac were downgraded, subprime loans were available to practically anyone. Remember low-doc or no-doc (document) loans as well as low down payment or no down payment loans? The objective at this time was a quality-of-life issue and getting people in a home of their own, which was a nice thing but a bad business decision. It opened the doors for homeowners with no skin in the game buying homes as well as investors just taking advantage of the situation.

Thankfully, that is not happening now. In fact, the lending standards have been extensively upgraded, making it difficult for homeowners without cash, jobs and good credit to get financing. This doesn’t mean we still don’t have a problem primarily with inventory. There are millions of millennials living with their families, unable to get out on their own, who will be looking for homes when the COVID dust settles and their careers get in gear.

This is why real estate professionals and economists still feel that long-term real estate will be a good investment; even if this bubble bursts there is something there to replace it. Until the Federal Reserve slows down their bond-buying, the interest rates will stay low, keeping the prices on properties high, and there has been no indication of the Federal Reserve reversing their policies any time soon. It’s possible to continue seeing 10% to 15% appreciation rates across the country. Although homeowners love to see this, it can’t be sustainable and definitely is not advantageous for helping those millennials to get out of their parents’ homes.

We do have one other potential bubble to worry about, and that’s homeowners who have taken advantage of the mortgage-relief programs the government put in place to help during the pandemic. These people are facing an end to the programs within a few months and many of them are not back to work or have totally lost their jobs. This is another important phase of the real estate market to pay attention to.

We are still in the midst of a powerful pandemic with millions of Americans out of work but in spite of this there is a real estate boom the likes of which we haven’t seen in 15 years. Bubbles come and bubbles go, and we can only hope we can navigate this one with more wisdom than the last. It seems there’s a Shakespeare verse for almost every part of modern life; now that’s real wisdom. Stay safe.

Castles in the Sand

Not a good time to fall in love

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Stressed-out seems to be the condition we’re all living with. It may not be an actual medical term, but if you have it, you know it. One of the fastest ways to catch “stressed-out” is to try and buy a house right now, and one of the biggest mistakes you can make when shopping for a home is to fall in love with it.

Valentine’s Day just passed, and I hope you had a lovely day with the one you love, remembering the warm glow and comfortable feelings you had when you first fell in love. Falling in love with a house may give you the same emotional rush as the flesh and blood love, however, you would be making a mistake to give in to it.

Now more than ever, with the shortage of properties available for sale, getting emotionally involved with a house will cloud your thinking and your ability to make good decisions. It’s exhausting trying to buy a home in this market. Whether you’re living in Florida or Montana, inventory is scarce all over the country. Because of the extraordinarily low mortgage interest rates, more buyers than ever are qualified to purchase a home, whether it’s their primary home or a second home, making the shortage of inventory even worse.

Know what you want and know what you can afford to pay for it. If you’re planning on financing, get pre-approved, meaning a full-blown credit application. Lenders will want you to produce bank statements, tax returns, income verifications, credit score and permission to run a credit check, stopping just short of your blood type. The final approval is pending on an appraisal of the property you finally choose, but your ability to get financing will be secure. In addition, there will be an expiration date on this approval, so work fast.

This process is substantially different from a pre-qualification which merely gives you a guideline on what you can afford based on the information you give the lender. In the competitive market we’re in where a high percentage of buyers are all cash, a pre-qualification doesn’t mean much to a seller.

Make a list of your “must-haves” and then tear it up. In the best of real estate markets, there are no perfect homes and you always have to compromise. In this market, compromise is on steroids; I can practically guarantee you what you buy will not look like the image you had in your mind.

If you are lucky enough to find something you love, please don’t “fall in love.” Full-price offers and offers above full price are common so try not to let love get in the way of good financial choices. It’s easy to get in a bidding war – know your limit and be prepared to accept it. Just like when your high school love broke up with you, you may think “I can’t go on,” but you will. Sometimes you just have to walk away before your emotions take over.

There will be more Valentine’s Days in your future and someday there will be more homes available to make up for the one that got away. Keep the stress level down by keeping the expectation level also down. Just like falling in love, the journey is the fun part. Stay safe.

Castles in the Sand

Boomers rule – again

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Babies born after World War II between 1946 and 1964 are generally considered Baby Boomers. Since their numbers were so enormous, they had an effect on the prices of everything from baby furniture to education, with the biggest impact being on the housing market.

The Baby Boom generation is 71.6 million strong and has been getting blamed for practically every financial issue in the country. Well, maybe “blamed” is a little too harsh; how about boomers have influenced much of the country’s finances since they were born beginning in 1946. Now, as boomers are getting ready to retire and downsize their homes, comes along a world-wide pandemic, freezing them in place.

The country’s home sales have surged in 2020 to the highest level in 14 years. As we now know, the pandemic has created the desire for families to move to the suburbs and into larger homes. Historically low interest rates, slightly below 3% for a fixed-rate conventional mortgage, have only made this yearning even more attractive.

There’s just one problem – the available number of homes to purchase is also historically low, down about 22% at the end of November according to the National Association of Realtors, and the poor Baby Boomers are getting blamed again. The length of time homeowners stay in their homes has been rising for several years. According to real estate brokerage Redfin Corp., the typical homeowner in 2020 had remained in their home for 13 years. This is up slightly from 12.8 years in 2019 but well ahead of 2010’s 8.7 years.

As the Baby Boomer population ages, they are in better health, more active and retire later, allowing them to remain in their homes longer. This existing trend combined with the pandemic has exacerbated the already low number of homes on the market. When COVID-19 started, this generation calculated there was no point in retiring since there wasn’t much else to do with their free time. Likewise, there didn’t seem to be any urgency to sell a large home and downsize since their retirement plans might have changed along with everything else in their lives.

In addition, there was a lingering fear of having strangers entering their homes during the pandemic, further delaying their decision to move. As the virus grew and more buyers were looking for houses, the market became more and more competitive, adding to the Baby Boomer anxiety about selling and finding another property to buy.

Many Baby Boomers crunched the numbers and just decided it was more appealing to refinance at the extremely low rates and stay in their homes rather than face a real estate market that was experiencing some serious challenges. Naturally, this decision by the boomer bubble only made the shortage of available properties worse, with sale prices moving up as inventory moved down, and, in my opinion, this won’t end soon.

Baby Boomers who have made the decision to stay in their homes and have refinanced to do so will not have the motivation to sell anytime soon. Even if they decide to retire, so many of their retirement plans – especially travel – are likely on hold for a couple of more years while the world digs out of the fallout from the pandemic.

So, you can blame the Baby Boomers all you like, but the reality is a bad convergence of world events is having the largest effect on the real estate market. Hang in there; we’re almost on the downside. Stay safe.

Castles in the Sand

New year, new homes

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

It’s the second week of the new year and it’s probably a good time to outline how homeownership has changed, not just during the past year, but beyond. Design space has had a surprising shift and lifestyle an even bigger one, all resulting in a subtle revolution in housing.

For starters, the demand for larger homes in 2020 has built on the desire to live in more space than ever before in our country. The average home built in the early 1950s was the hard-to-believe number of about 950 square feet. By 2017, the average new home size had almost tripled to 2,700 square feet, and when the analysis of 2020 new home building is done, we will certainly see that number go up as well.

Single homeowners and single women homeowners have changed a lot since the 1950s, when the vast majority of homes were owned by married couples. Today, almost 40% of homeowners are single, and today, a single woman is about twice as likely to buy a home as a single man. Here again, 2020 could increase those numbers too.

The really big financial change from 1950 is that about 60% of homes then were owned outright and only 40% carried mortgages. Today that ratio is reversed, and with the current extremely low mortgage rates, homeowners with mortgages will probably increase even more.

The COVID-19 pandemic and lockdown jolted our lives, locked us in our homes and drove us out of the big cities. So, what’s next? Chances are, probably more of the same. Working from home, schooling from home, cooking from home and moving to the country and suburbs to give our families space has changed our housing needs.

The ubiquitous open floor plan concept has been the dominant home design for decades, and if the pandemic hadn’t change our lives, would probably have continued for several decades more. However, the necessity of home offices, areas for schooling children and just the plain old need for privacy has changed.

Everything from city apartment dwellers using movable bookcases to provide refuge spaces to the popularity of dens and adult studies have been carved out of the open floor plan. And with the new-found experiences of learning and working virtually only exploding in the future, it’s likely that protected niches and nooks will take over soaring ceilings and bowling alley-size living space.

According to a recent article in the Wall Street Journal, home decorating for the new year also has some changes ahead, keeping the psychology of cozy is better and less is more. White, sterile-looking bathrooms are out being replaced by a softer, more natural look. Open-air showers are bringing us back to nature and out of the hustle-bustle of cities. Glitz in fabric and design schemes are out but soft fabrics that are touchable like velvet and mohair are in. Open shelving in kitchens is – thank goodness – out. Neat kitchens that people actually cook in are in, with seamless façade cabinets eliminating hardware. Smart kitchen faucets that are not only hands-free but respond to voice commands are in. Paint colors are also going through a reset, with deep green, blue and gray evoking calmness, replacing white. And finally, true farmhouse décor with barn door sliders is out, replaced with a modified version, less barn, more user-friendly.

Men don’t wear ties to mow the lawn like they did in the 50s and most women don’t own frilly aprons and prepare dinner in pearls, but much of our 50s experience is returning. Homes with yards, do-it-yourself home projects and cooking family meals is a good thing. As the new year unfolds, there will be plenty more changes to our culture and lifestyle influenced by the COVID-19 pandemic. We’re almost there; stay safe.