by Carol Nasser
According to Wikipedia, Green building is the practice of increasing the efficiency with which buildings use resources while reducing building impacts on human health and the environment, through better siting, design, construction, operation, maintenance, and removal — the complete building life cycle.
In Chicago, we have an abundance of ways we can go green. With our vintage housing stock being rehabbed, we can save timber from flooring and joists to reuse in new construction. Living in the heartland, we have access to materials that have a minimal impact on the environment such as bamboo flooring, rooftop gardens for energy conservation, sustainable energy panels installed on new and existing construction, and high efficiency appliances and low flow toilets. My favorites are Carlisle Wide Plank Flooring, Chicago Gardens, ABT Electronics and Energy Star Appliances for appliances, and The Solar Panel Store for information on solar panels for residential use.Recently some savvy developers and rehab specialists in Chicago have hit a chord with the concept of “Green Buildings”. The cynic in me says this is a ploy to attract buyers but upon closer inspection, I think these buildings are the wave of the future.
Existing Structures
The Chicago Center for Green Technology is a model for the nation as it is only the third building in the United States to be designed according to the LEED rating system using the highest standards of green technology available. It is the only one of the three that is a renovation of an existing building and the only one accessible by public transportation.
A great resource for existing homes is Greenbean. Peruse this site for more information on existing homes located at 1313 W. Ohio; 1840 N. Leavitt, 3905 N. Janssen and more.
Two examples of new developments are:
- Emerald (123 S. Green Street) Emerald features eco-friendly products wherever practical such as bamboo flooring, low-VOC paint and beautiful fabrics made from recycled fiber. Even th marketing materials utilize recycled paper manufactured with windpower and printed with soy inks. (reprinted from the Emerald website)
- The Winthrop Club Condominiums in Evanston (1567 Maple): a prime example of the benefits green building holds for all. It has been designed to capture more than 25 different credits in LEED’s five rating categories (reprinted from the Winthrop Club web site)
For more information on going green in your own home, read this interesting CNNMoney article about the benefit to homeowners for jumping on the green bandwagon.
Fun “Chicago” thing today is a vegan, vegetarian, and whole food restaurant, my favorite is Blind Faith in Evanston.
To view more entry’s by Carol Ann please click here.
From this week’s Business of Life
By: Kevin Davis April 21, 2008
One year ago, Chicago attorney Donna More had to put her downtown home up for sale after landing a new job in Cincinnati. She’s still looking for a buyer.
Ms. More commuted between cities for a few months but has since moved out of state with her husband and 4-year-old daughter. She originally listed the six-bedroom home in the Kingsbury Estates community for $5.3 million. “I thought, ‘This house is so beautiful, it will sell right away,’ ” she says. “I guess I’m surprised.”
After seeing little activity on the home, Ms. More switched brokers, turning the listing over to Karen Peterson, a 23-year veteran who specializes in luxury properties for Coldwell Banker Residential Brokerage. Ms. Peterson has twice lowered the asking price; now it’s $4.7 million.
“I had a person come to me with an offer of a million under what the property was listed for,” Ms. Peterson says incredulously. “People want bargains. You just say, ‘No, thank you.’ There are a lot of bottom feeders out there.”
Because Ms. More and her husband, who owns a public relations firm, are able to cover the cost of two mortgages for now, they don’t intend to sell below what they think the home is worth.
“People who own higher-end properties can afford to ride out the storm,” Ms. Peterson says. “Some prices need to be adjusted. Some don’t. The majority of sellers I’m working with are not having fire sales. There’s this false belief that there’s a lot of inventory people want to get rid of.”
The reluctance of sellers to part with their properties for bargain-basement prices — coupled with buyers who believe sellers are desperate and expect deals to match — is contributing to lengthy market times, especially on the higher end.
Louise Study, a broker for Rubloff Residential Properties in Chicago and publisher of “The Study Study of Residential Real Estate,” an annual report on the Chicago-area market, says that asking prices, especially for higher-end homes, generally are not dropping by much.
“When you get to the upper echelon, there’s only a small number of buyers who can afford it, anyway,” she says. “The prices aren’t going down, but the market time is going longer.”
In Chicago, according to her report, average market times for homes priced at $1 million and higher in 2007 were six months, compared with five months the previous year. The average sale price was $1.7 million in 2007, up from $1.67 million in 2006, indicating that value has been holding.
This year, overall average market times at all price points in Chicago were just over five months, with an average sale price of $312,530, based on Multiple Listing Service of Northern Illinois figures from February.
Yet these numbers are not always an accurate reflection of how long an owner has been trying to sell a property. A property can be “de-listed” for 90 days, allowing the official market time to reset to zero on the Multiple Listing Service database.
The advent of spring has given agents some hope.
Debbie Scully, a broker with Baird & Warner in Highland Park, has been trying to sell a new five-bedroom home in that suburb. The home, which replaced a tear-down, was listed for $2.5 million nearly two years ago, before ground was broken.
“We listed it before the house was done in case the buyer wanted to customize things. In a hot market, we sold a lot of properties that way,” she says.
But not this time. Ms. Scully took it off the market, then re-listed at $2.4 million and staged it, bringing in furniture and top-end appliances. “This is the longest one I’ve ever had,” she says. “You want to come up with something other than just lowering the price. If you go low enough, anything will sell.”
The home is now being offered for rent at $8,500 a month to try to help the developer recover some costs. “Of all the listings I’ve had, this is the most frustrating,” she says. “It’s a beautiful home. It’s in a great location and it has magnificent views. What am I missing?”
Tony Zaskowski, owner of Property Consultants in Chicago, has been experiencing the same long market times, especially with higher-end new construction. “Some people get scared” at seeing long market times, asking, “What’s wrong with it?” he says. “Why didn’t this sell?”
One of his properties, at 1759 N. Wilmot Ave., has been listed for about two years. The home was built originally by developer Micheal Skowron, who says he intended to live there but decided to sell instead.
Mr. Zaskowski inherited the listing from another agent who originally sought $3.1 million. He took it off the market, lowered the asking price to $2.8 million and re-listed.
Two offers fell through because the potential buyers were unable to get financing. “That’s a big problem,” Mr. Zaskowski says. “They’re having problems securing the loans.”
Mr. Skowron says he was testing the market with this home. “I don’t do spec homes any more,” he says. “When you start paying interest and carrying costs on properties that have not sold, you can’t continue to do that.”
With spring here, Mr. Zas-kowski is more optimistic. “The signs are already there based on the traffic and phone calls coming in,” he says. “Interest rates are low, and a lot more people are coming out of hibernation.”
Not all real estate agents are as optimistic. “My experience is that it’s a much tougher market this spring because there’s so much inventory,” says Amy Morro, an agent with Prudential Preferred Properties in Chicago. “There is a lot of competition. In the first four weeks of a listing, that pent-up pool of buyers comes out and competes, and if they don’t like something right away, they move on.”
Ms. Morro recently took over a listing for a three-bedroom townhouse at 424 E. North Water St. The owner put it on the market last August for $789,900, then took it off three months later. Ms. Morro urged the owner to reduce the price and re-listed it in February for $779,000. She knows that if she doesn’t make the sale soon, it’s liable to go unsold for a long time.
That’s because homes that do sell move relatively quickly. A Prudential Preferred study of the area showed that of all the homes that had contracts pending in January, 65% sold within the first 45 days and 81% within 90 days.
“You really get one chance to make that first impression,” Ms. Morro says. “You have to be priced right, and you have to be ready to go. I always de-clutter, make sure it’s clean. You want to make it homey and inviting.”
Yet many homes remain unsold, with sellers unable to figure out why.
James Miller is both a real estate investor and a broker for Re/Max who is trying to sell homes in the Lincoln Square area. Among them is a three-year-old, four-bedroom Victorian-style home at 4550 N. Claremont Ave. that’s been on the market nine months. The original asking price was $1.2 million. He took it off the market in July for 90 days and re-listed it, dropping the price by $100,000. He’s had more than 20 showings and six open houses.
“The strange thing is that we’ve had second showings,” he says. “I don’t know what it is. . . . This is a perfect house. It’s in a great location. It should sell.”
Mr. Miller also invested his own money in a new six-bedroom home at 2104 W. Giddings St. It’s been on the market for a year, though the home was just completed in January. He’s asking $1.6 million and plans more open houses this spring.
“As soon as the weather warms up, things will change,” he says.
©2008 by Crain Communications Inc.
From this week’s Business of Life
By: Laura Bianchi April 21, 2008
When the owner of a $1.3-million house in Old Town insisted on a pre-approval letter for every potential buyer who wanted a showing, Mario Greco cringed.
“I can understand if it’s a $15-million property, but at a million-three, it cuts off legitimate traffic. I had potential buyers who didn’t want to go through the rigmarole,” says Mr. Greco, an agent with Rubloff Residential Properties on North Halsted Street.
Partly because of that, he says, the house took nearly four years to unload.
Owners of million-dollar-plus properties make just as many mistakes when they sell their homes as their less affluent neighbors — with even more costly results, say Chicago-area brokers.
Most agree that given the current plunge in the market, the biggest error is pricing the property too high.
“Prices are retracting, and sellers aren’t believing it yet. They stand firm,” says Leslie Senne, agent with Property Consultants, 2200 N. Damen Ave. “Re-educating them is a big challenge for all of us.”
Another misstep: expecting to recoup the cost of very high-end amenities and décor.
Lynn Purcell, a broker with Baird & Warner in St. Charles, recalls a St. Charles homeowner who opted for $20,000 in wrought-iron spindle railings throughout her house. When she put her house up for sale, “the appraiser gave them nothing” for the upgrade in terms of value, a big disappointment to the owner.
In another case, Ms. Purcell showed a $1.5-million house in St. Charles with a “killer” lower level: top-grade bathroom faucets, tile and custom vanity; a huge cherry bar with top-of-the-line appliances; media room with built-in entertainment cabinetry, and deluxe carpeting everywhere.
The owners had spent at least $65,000, but the selling price did not cover the costs. “Carpet is carpet” in the appraiser’s eyes, she says. “The upgrades help you sell it, but you don’t necessarily regain the cost.”
Kim Jones, an agent with Baird & Warner’s North Michigan Avenue office, sees the same thing on the Gold Coast.
“I just sold a town home for people who had spent $90,000 on inlaid doors and more on intricate marble work,” she says. “Twenty years later, it’s very dated,” but the owners couldn’t understand why they couldn’t recoup that money.
Avant-garde decorating can repel high-end buyers, says Connie Atterbury, a Koenig & Strey agent on the Gold Coast.
“Their designers go over the top, and it limits the number of people who will even consider buying,” she said. “I was showing a place recently where the bedroom was purple, the drawing room orange. It’s better to neutralize.”
“Helicopter” owners are another turn-off, Ms. Jones says, making buyers feel rushed, inhibiting questions, expressing concerns or investigating closets and cabinets.
“They want to stay during the showings to make sure the home isn’t damaged, or that the client isn’t taking pictures of the Renoirs on the wall,” she says. “But if they hover, it is hard for me to sell it.”
Seen on the street: The multimillion-dollar mistake of not tidying up the grounds around high-priced Near North Side homes. Photos by John R. Boehm |
Poorly maintained properties are another issue, even for multimillion-dollar homes, says Thad Wong, co-founder and CEO of @properties Inc. in the Fulton Market district.
Some owners are so smitten with their house that “they allow it to be shown without being perfect,” he says. “In today’s market, there is no room for error or sloppiness; buyers are demanding ‘perfect’ in high-end properties.”
Ms. Atterbury says some homeowners become accustomed to living with imperfections and start to overlook them, and some agents are overly timid about pointing out needed improvements. “They have a responsibility to make the seller aware, but they don’t want to hurt the homeowner’s feelings.”
Ms. Atterbury says even 8,000-square-foot homes need to be staged, or buffed up and neutralized so they appeal to a broad range of buyers. An interior designer is brought in to rearrange furniture, hang art and recommend spruce-ups like painting, landscaping, caulking or deep cleaning.
Million-dollar-plus sellers think, ” ‘At this level, (buyers are) going to paint it anyway, they’re going to replace the carpeting; I don’t need to,’ ” says Ms. Atterbury. “But you’ll get a better price if you do.”
Perhaps most startling, some sellers strip out top-quality light fixtures and hardware in their home and replace them with inferior versions, Ms. Atterbury says.
“They assume the new buyer will come in with their own decorator and redo it,” so they might as well keep the items for their new property. But a stripped property, needless to say, doesn’t show well.
“You either sense high quality and value, or you don’t,” she says. “It cheapens the property in the eyes of the buyer.”
©2008 by Crain Communications Inc.
http://searchchicago.suntimes.com/homes/news/897459,opportunity116.article
April 16, 2008
BY LINDA SCHWEITZER - Special to the Sun-Times News Group
Opportunities and incentives await the smart and savvy home buyer who decides to purchase a new home now.
With interest rates at an all-time low and a variety of new homes in local communities filled with amenities, home buyers have their pick of affordable houses for a lot less money.
“Because of the declining market, you are really getting a generous deal for your money,” said Amy Capista, vice president of sales and marketing for Phoenix Builders. “It’s very competitive in the existing markets and right now, you have to come down a little in your prices, so buyers are going to get a good deal. Interest rates are still competitive and are going to be good, they are still an awesome rate.”
“We have had steady and consistent sales for the last three months and our clients can see that integrity,” Capista said. “While some builders have totally slashed their prices, that has helped the current decline on new home values.”
“We value our communities and want to keep the value up, and our customers are not going to see the value of the house decline. Other builders may not care for the protection of the area, but for us, being home grown, we really have a value in our community. We live here and our goal is to see a build up in your homes equity and not a decline in your property.”
As many homeowner know, owning a little piece of the American Dream can make a substantial difference when it comes to tax time. Having a home not only allows for tax deductions each year when paying Uncle Sam, but equity in the house builds as well.
“There are several reasons it is always a good time to buy a home, but there is so much leveraging power you have when buying a home,” said Mike Venetis, vice president of sales and marketing for Bigelow Homes. “A house appreciates and most double in value every 10 years. Buyers should think of it as a main investment, think of it as buying stock.”
“We’re seeing the most aggressive pricing in years and there are a great supply of homes to choose from,” Venetis said. “The interest rate is at a historic rate and it’s phenomenal.”
“You never know when prices will change and the market will bottom out, so it’s a gamble,” he added. “But it’s a gamble for the people who want to wait for the market to bottom out.”
Even with low interest rates, many home buyers are treading with caution and some are afraid to make their move. With the subprime mortgage crisis still a frequent headline in the news, people were concerned. Changes in the housing market forced everyone to take a closer look at their financial portfolio and forced buyers and builders to become more creative.
Before embarking on a new home, buyers should examine their credit status and purchase only the home they can afford. They are encouraged to become more educated and knowledgeable and seek out reputable mortgage lenders. Builders have become more supportive, helping with potential buyer’s financial analysis and offering consultants to meet with the buyer.
A little hand-holding
“People are anxious right now about the market place and the way it is, and right now what the market place needs is confidence,” said Patrick Curran, president of West Point Builders. “It really is what people are doing right now.”
“Newer homes appreciate at a higher rate and it is a much better from an investment standpoint to do it now,” Curran added. “If you are moving in a couple of years, you can’t guarantee that the interest rate will be as low.”
“We are definitely seeing people a lot more nervous than before,” said Shannon Gibson-Giampa, owner of Gibson and James Properties. “Everyone is watching the news and looking at nationwide scenarios. We are seeing a more cautious buyer and a much more educated buyer, too. Everyone is dotting their i’s and crossing their t’s and doing their homework.”
“You try to reassure people that the floor isn’t going to drop and they can get a great product at a really great price and borrow money inexpensively,” Gibson-Giampa said. “The bottom line for buyers is that they can get what they want. They can create a wish list and be happy.”
Capista also sees customers who are interested, but likewise nervous.
“We do a lot of hand-holding,” Capista said. “They have a lot of concerns and we have to find out what their concerns are. We have our own consultants working within our offices and if they can put a name with a face, they are feeling more comfortable. There is a lot of trust involved and they need to trust us.”
“With some builders, you may never see who owns the company,” she added. “But the customers I see, I am going to see them in the neighborhood or at the grocery store. “It’s not in our best interest to lead people into a sale they are not comfortable with. Their customer concerns are important to us.”
“The prior market and some other builders may have given us a little more work to do, but we are determined to get that trust,” Capista said.
“What has happened in our market place, and the problem is, most in the position got here of their own accord by lending that is not from a reputable lender,” Capista said. “We give people plans to really realize what they are going to have to do, and with a lending market right now with tighter restrictions, it is kind of difficult to get a loan.”
“We put them on a plan and discuss it with them and if they have messy credit right now, we will put them on a six to nine month plan, depending on what their credit standing is,” Capista said. “It’s more of putting people on a course and we may wait another five or six months to take care of some financial issues. As a builder, we care about our people and it’s our goal to sell a home, but not at the (risk) of having a foreclosure.”
Capista describes the present market as “a rebalancing” and advises home buyers not to get caught up in spending too much and points out that the mortgage companies will be helping with that. “It’s still a good market, and we are just waiting for the balance and the adjustment to take place,” Capista said. “We have a mortgage situation that has taken effect and most people did it themselves. We are trying to work with riding out this wave and getting back to the norm.”
Great prices drive interest
Oakley Home Builders owner and president Steve Sobkowiak refers to the company he and friend Ryan Dunham founded in 2003 as “the new kids on the block.”
Located in the western suburbs of Downers Grove, Hinsdale, Naperville and Glen Ellyn, Sobkowiak said they are seeing a lot of success, building nine homes last year, with six of those being pre-sold.
“We’ve had our best year and the growth has been phenomenal, the cost of land is so much lower than in recent years and the interest rates are also phenomenal,” Sobkowiak said. “People really study the market, and at this you are buying low and buying land at 2005 prices.”
“We haven’t dealt with customers who are nervous. They are buying at such great prices and they have the financial means to do that,” he added. “If you are looking for an opportunity to build your dream home, this is the time.”
First-time buyers have one advantage over veteran homeowners in that they don’t have to sell their home before they can buy another. And while the housing market for used homes has also slowed, people are still buying existing homes in established neighborhoods.
“If someone is having a home to sell and they are nervous, the good thing about new construction is that they have a later delivery date and they have time to sell that home,” said Shannon Gibson-Giampa, owner of Gibson and James Properties.
“If you are looking at an existing home with new construction, it gives you a little bit of a breather. But I also always tell people to make sure their home is ready to sell before they put it on the market,” she added. “The homes that are selling are the ones that are ready.”
“We try to do our homework on that as well for the customer,” said Gibson-Giampa. “Many times we can find a home that just sold on their block, and that reassures them that homes are selling.” Curran said West Point Builders offers an extended delivery program that allows buyers the time needed to list and sell their present home.
“What we are doing to help that homeowner is a guarantee sales program to sell their current residence,” he said.
“If a customer knows they are going to buy a new home, there is a certain amount of time before that,” Curran said. “And if you have good solid credit or even if your credit is decent, there are ways you can get that fixed. If you carry high credit card debt, you can work to get that down. We concentrate on that during this next three months to get where we need to go.”
“We do get quite a few transfers or people from out of state and other clients wait until they sell their home,” he added. “We tell them you sell your home first, rent a couple of months if you have to, and then we’ll have your house done. This is the way we direct clients. We sell their house first and then as soon as that happens they call us and we start on their home.”
Taking that first step
Bob Nelson, president of Tanglewood Homes, which builds custom homes at Tanglewood Oaks in Aurora, feels any nervousness on the part of the homebuyer may just be “in taking the first step.” “The people I have talked to have sold their homes,“ he said. “But the fact is there is a little bit of exaggeration about how bad it is. Everyone has a feeling that the sky is falling, but I don’t think people are going to have as difficult a time selling their home as they think.”
“Our program is that you can put a deposit down that is refundable,“ Nelson said. “We get it processed and will do all the selections, we just won’t start to build until the homeowner says “go”. Our custom homes are built to specifications and we can get it all designed and then when the customer sells their house, we can start on it.”
“But I’ve seen traffic pick up since last week and it is a lot better now than early January,” he said. “There are buyers out there for (resale) homes just as there are for new homes.” Chalen Parrish, owner of Parrish Builders believes fair market value is why customers keep coming back to Deercreek Estates in Wilmington.
“Many of the houses are priced at what they should be instead of being inflated, and if someone gets in now, they will be able to get the same equity that someone got a few years ago,” Parrish said. “Some people are cautious but we are finding that they come in, go elsewhere and turn around and come back because what we give is a standard fair market.”
As far as homeowners having trouble selling an existing home, Parrish hasn’t seen it.
“I’ve seen some homes that are put out at market price and have sold in three weeks,” Parrish said. “It depends on where you are and the amount of traffic, we are seeing more people coming to take a look.“
In 16 years of business, Parrish admits he hasn’t seen the market this slow, but he’s optimistic that prices are returning to balance. “You have to remember that only 1 percent of the homes are foreclosed upon,” Parrish added. “There are 99 percent that aren’t. No one realizes the percentage of homes that haven’t foreclosed
http://rismedia.com/wp/2008-03-31/second-home-sales-accounted-for-one-third-of-transactions-in-2007/
RISMEDIA, April 1, 2008-The combined total of vacation- and investment-home sales declined with the overall market in 2007, but still accounted for 33% of all existing- and new-home sales, which is close to historic norms, according to the National Association of Realtors®.
The market share of homes purchased for investment last year was 21%, down from 22% in 2006, while another 12% were vacation homes, compared with a 14% market share in 2006. The total share of second homes declined from 36% of transactions in 2006.
NAR’s annual Investment and Vacation Home Buyers Survey shows vacation-home sales dropped 30.6% to 740,000 in 2007 from a record 1.07 million in 2006, while investment-home sales fell 18.1% to 1.35 million last year from 1.65 million in 2006. At the same time, primary residence sales declined 10.0% to 4.34 million in 2007 from 4.82 million in 2006.
Lawrence Yun, NAR chief economist, said the findings suggest different cycles for each of the sectors over the past two years.
“Investment-home sales declined sharply in 2006 as speculators disappeared, leaving the market to serious buyers, with the pattern continuing in 2007,” he said. “Vacation-home sales rose to a new record in 2006 because there was a pent-up demand from buyers who couldn’t find a property as a result of tight supplies in preceding years.”
The overall sales decline in 2007 resulted from a combination of factors.
“Certainly, second homes are discretionary purchases and there is a natural tendency to pull back from big-ticket items in periods of uncertainty,” Yun said. “The other factor is the disruption in the mortgage market, with a significant tightening of credit during the second half of 2007. Some buyers simply adopted a wait-and-see attitude.”
Yun said lifestyle factors and strong demographics remain positive for the vacation home market. “Investment considerations are secondary for vacation-home buyers, so there is some dormant underlying demand,” he said. “A peak of population is moving through the prime years for buying recreational property. It is welcoming to see investment sales returning to pre-boom sales activity.”
The median price of a vacation home was $195,000 in 2007, down 2.5% from $200,000 in 2006. The typical investment property cost $150,000 last year, unchanged from 2006.
Fifty-nine percent of vacation homes purchased in 2007 were detached single-family homes, 29% condos, 7% townhouses or row houses, and 5% other. In 2006, single family homes accounted for 67% of vacation-home sales, while condos were 21%.
There were no significant changes in investment housing types. Sixty-one percent of investment homes purchased in 2007 were detached single-family homes, 20% condos, 11% townhouses or row houses, and 8% other. Twenty-eight percent of vacation-home buyers paid cash for their property, as did 35% of investment buyers.
Sixty-five percent of vacation home buyers and 71% of investment home buyers purchased existing homes, while the remainder purchased new homes.
The typical vacation-home buyer in 2007 was 46 years old, had a median household income of $99,100, and purchased a property that was a median of 287 miles from their primary residence.
In listing the reasons for purchasing a vacation home, 84% of buyers wanted to use the home for vacation or as a family retreat; 30% to use as a primary residence in the future; 26% to diversify investments; 25% to rent to others; 16% for the tax benefits; 14% for use by a family member, friend or relative; and 6% because they had extra money to spend.
Last year, 19% of vacation homes were purchased in the Northeast, 16% in the Midwest, 41% in the South and 24% in the West. In terms of location, 30% of vacation homes were purchased in rural areas, 20% in resorts, 20% in a suburb and 14% in an urban area or central city.
Investment-home buyers last year had a median age of 42, earned an income of $92,900, and bought a home that was relatively close to their primary residence - a median distance of 27 miles.
When asked about the most important reasons for their purchase of an investment home, 51% said to provide rental income; 39% to diversify investments; 21% to use for vacations or as a family retreat; 16% for use by a family member, friend or relative; 11% for tax benefits; 10% to use as a primary residence in the future; and 4% because they had extra money to spend.
Twenty-three percent of investment properties purchased in 2007 were in the Northeast, 19% in the Midwest, 38% in the South and 21% in the West.
Thirty-nine percent of investment homes were purchased in a suburb and another 20% in an urban or central city area, 21% in a small town, 15% in a rural area, and 5% in a resort area.
Vacation-home buyers plan to keep their property for a median of 10 years; 38% plan to keep their vacation home for 11 years or more. Investment buyers plan to hold their property for a median of four years, with 29% planning to keep for six years or more. However, 10% of investment buyers plan to sell in one year or less.
Eight in 10 second-home buyers consider it a good time to invest in real estate, compared with 59% of primary residence buyers. Forty-four percent of vacation-home buyers and 57% of investment buyers said they were likely to purchase another property within two years.
NAR’s 2007 Investment and Vacation Home Buyers Survey, conducted in March 2008, includes answers from 1,965 usable responses. The survey controlled for age and income, based on information from the larger 2007 National Association of Realtors® Profile of Home Buyers and Sellers, to limit any biases in the characteristics of respondents.
For more information, visit www.realtor.org/newresearch.
RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.
For more real estate headlines, see:
By DAVID LEONHARDT
Published: March 26, 2008
http://www.nytimes.com/2008/03/26/business/26leonhardt.html?ex=1207195200&en=d45ad188e884c32e&ei=5070&emc=eta1
In 2005, Randolph Harrison and his wife, Pamela, decided to move north from Silicon Valley, over the Golden Gate Bridge into wooded Marin County to be closer to her new job. They found a six-bedroom house that seemed ideal except for the price, $1.875 million. The current owner, they knew, had bought the house a year earlier for $1.475 million.
Multimedia
Graphic
So the couple, who both have finance jobs in the technology industry, told their real estate agent that they wanted to offer $1.575 million. He told them that the owner wouldn’t even listen to such a low bid. The owner’s attitude was “we’ll just stay here until we sell it for 1.875,” the agent said, “even if it takes years.”
Three years ago, when the real estate bubble was still inflating, this sort of standoff was the exception. It’s the norm today. Overall home sales have fallen a remarkable 33 percent since the summer of 2005. Home prices, on the other hand, continued to rise until 2006 and are now only 5 to 10 percent below where they were in mid-2005, according to various measures.
In most other areas of the economy, this combination of plummeting sales and stable prices would not happen. When demand for airline tickets drops, the airlines cut their prices until they have sold their seats. When stocks become less appealing, share prices fall, sometimes sharply.
Just try to imagine stock prices staying roughly flat over a three-year period while sales volumes sank because investors considered the market overvalued. Bear Stearns is still worth $150 a share, and I’m not selling until someone pays me $150!
Real estate, though, is different. For both economic and psychological reasons, there is no asset more conducive to hopeful overvaluation.
That means real estate slumps tend to grind on for years, until sellers submit to reality and reduce their prices. This week’s batch of economic reports suggest that the adjustment is finally starting to happen. The decline in house prices is accelerating, especially in some of the big metropolitan areas covered by the Case-Shiller index released Tuesday, while the number of home sales has recently risen a bit.
But prices still have a ways to fall. Relative to the economic fundamentals — like incomes and housing supply — the average price nationwide seems to be about 10 percent too high. (This, of course, hides a lot of variation. In Texas, prices look sensible, while in much of Florida and Arizona, they are probably about 25 percent too high.)
The slow unwinding of the real estate excess, in turn, means that the turmoil in the financial markets and the country’s broader economic problems also aren’t anywhere near their end. Ben Bernanke, the Federal Reserve chairman, recently told Congress that the stabilization of prices was “what we’re looking forward to.” That is, the end of the real estate slump is the only thing that can get the economy back on solid ground.
Until house prices stop falling, it won’t be clear how many more people will default on their mortgages. Even homeowners who stay current on their mortgage payments will be affected. With the value of their largest asset dropping, many will decide to spend less and save more, aggravating the economic slowdown.
On Tuesday, the Conference Board reported that Americans were more pessimistic about the economy’s direction over the next six months than at any point since the bad old days of the 1973 oil embargo.
In many ways, it would be better if the housing correction would happen more swiftly and sharply. The pain might be worse, but it would be over quickly. We seem to understand this principle when we’re removing a bandage. Why, then, is it so much harder with housing?
Because houses are almost perfectly engineered to trick owners into overvaluing them.
For starters, people have an obvious emotional connection to their house. After you have raised a family or enjoyed long meals with friends there, you are naturally going to place a higher value on it than a dispassionate buyer would. It’s your home.
In normal times, buyers and sellers can still come to an agreement because inflation allows sellers to feel that they have made a nice return on their house. People don’t sell houses frequently, so the sale price of a house is almost always higher than it was when the current owner bought it, just as the price of food, haircuts and everything else tends to rise over a five- or 10-year span. Because of leverage — the fact that people buy houses mostly on credit — these inflation-driven price increases turn into true investment gains.
In the wake of the biggest housing boom on record, it’s understandably hard to accept a new reality. Robert Glinert, a real estate agent in the Los Angeles area, said he has recently been saying no to almost half the sellers who have asked him to represent them. Their initial asking price is just too unrealistic.
“People say, ‘I don’t care about the market — my home is still worth what I paid for it in 2006,’ ” Mr. Glinert told me. “And I say, ‘To you. Only to you.’ ”
Doing what Mr. Glinert is asking sellers to do — dropping the asking price below their purchase price — is especially difficult. It’s tantamount to admitting defeat.
David Laibson, a leading behavioral economist, categorizes this sort of behavior under the heading of “the principle of the matter.” His point is that people often go to great lengths to avoid taking a loss — or simply having to acknowledge one. “Even a small loss evokes a sense of frustration,” said Mr. Laibson, a professor at Harvard. “There’s something magical about ‘at least breaking even.’ ”
Often, this hurts no one so much as it hurts the would-be sellers. They stay in homes where they no longer want to live, rather than accepting their loss and moving on. Or they move but endure the hassle of renting out their old home, waiting, usually in vain, for the mythical buyer who understands its charms. All the while, their money is tied up in the house, and inflation is eating away at its real value.
Back in 2005, after Mr. Harrison and his wife couldn’t find a house they considered fairly valued, they opted to rent instead. They pay $3,250 a month for a four-bedroom home, which is a bargain relative to what their mortgage payments would have been.
And that six-bedroom house listed for $1.875 million? The last Mr. Harrison checked, it still hadn’t sold.
E-mail: leonhardt@nytimes.com
