Lions, Tigers, and recession??

It’s been awhile since we’ve heard the word “recession” spoken about with any real passion. I do believe I’ve been hearing rumors for the past few years or so, but that was more than likely the talking heads trying to sell newspapers. With mortgage rates near record lows and the stock market reacting to the Chinese trade issues, it seems we might be in for some convulsions. Here’s the funny thing; of the last 5 recessions, housing prices actually went up. In 1980, properties appreciated 6.1%. In 1981, we had an increase of 3.5%. 2001 saw a gain of 6.6%! Of the the two times they went down, once was in 1991, with a drop of 1.9%, and a massive devaluation in 2008 of 19.7%. 2008 was clearly a case of irresponsible lending and the discounting of mortgages on the secondary market.

What does all this mean? History tells us that often times when the stock market starts to move back and forth, investors pull out cash and invest in hard assets like real estate. The sudden demand can cause an opposite effect on real estate and push prices up due to lack of inventory. Inventory can decrease due to sellers taking properties off the market with a “wait and see” attitude.

With rates as low as they are, and prices expected to still rise, now might just be the best time to upgrade or make that first purchase. As for income property, my attitude is always the same; if it cash flows, it makes sense. There might be mitigating circumstances that make a particular property a bad choice, but taking advantage of a purchase or exchange with todays rates is a savvy move at this time. I for one am looking to increase my portfolio. As always, contact me if you have any questions or want to discuss your strategy.

Stairs or no stairs, that is the question.

The stairs question comes up at almost every open house and showing. When I’m working with folks starting to think about retirement, it comes up 100% of the time. My wife and I have had this discussion at least 100 times. It always starts with the empty nest concept; when our last child goes off to college, should we downsize to a smaller single story home?

I never thought I’d write about it; what’s the big deal? As we get older, we want everything on the same floor, right? As we become less active, our ability to manage stairs diminishes; or is it the other way around? Maybe we become more sedentary as we age because we are constantly looking for things to make our lives easier. Elevators, ramps, shorter walks, easier to manage floor plans, closer parking places, and on and on. But this question keeps coming up; why exactly do we not want stairs as we age? The obvious answer is we are going to get old and infirm, might as well prepare now. I disagree 

 If we go back a few decades, nobody was downsizing as they got older. Almost everyone stayed in their home till the end, stairs and all. There was no moving to a condo (I love condos!) to make life easier. We are a more affluent society, and a lot of us can afford to move when we want; however, do we have to have a home with no stairs? I would say no; if you are assuming you won’t be able to use them one day, you probably won’t. Most of the time when we tell ourselves we can’t do something, we can’t.

My mother in law is 78. She lives in Japan, in a two story house with very steep stairs, and is fiercley independent. At 4’8”, those steps are even steeper for her. The thing is, she runs up and down those stairs 100 times a day. During a recent visit, I asked if maybe it was time to move to a condo (in Japan they call condos mansions; don’t know why), where she wouldn’t have to deal with stairs. Her answer was absolutely not! The reasoning was if she stopped using the stairs, she would lose the exercise she was getting from going up and down. Also, there would be no garden to take care of, or bigger house (all 700 sf) to maintain.  She assumed, rightly so, that her life would be much too easy in a single story condo. Where lives now forces her to move and exercise muscles she would not have to if she relocated. Consequently, she can out walk most people my age (56) and can certainly out walk most everyone her age. 

Now, I realize there are circumstances where one can not navigate stairs; this is not directed to you. The idea behind writing this is to at the very least give you food for thought; am I passing up what might not ever affect me? Perhaps you might have another 10 or 20 years before stairs are a problem. Perhaps never…..

So, when you’re looking for a new house to move to after the kids move out, don’t avoid the stairs! Unless you already have issues that would keep you from using them. 

 As you search for that perfect home, not worrying about stairs will make your search so much easier. I would think location would be more important. Being close to the things you enjoy, like the beach, the mountains, coffee shops, and having a place big enough for the grandkids should be higher on your list. 

Let me know what you think, comment down below. Thanks for reading!

Oh, and next time you have a choice between the stairs and an elevator, take the stairs!

Timing The Real Estate Market

We’ve been hearing a lot about bubbles, market crashes, and gloom and doom for the past couple of months in real estate; even as the economy keeps up a brisk pace, there is a certain group that always talks as if “the sky is falling”. Even I have become “negative” a couple of times in the last few months, but not for the reasons you might think. It has to do with folks who think they can “time the market”.

When I look at buying and selling real estate, I tend to look from a different perspective; that of a marathon runner, and not so much as a sprinter. In November 1998, the median house was $162,200 in California. In November 2018, the median price is $476,600 (Zillow) That’s nearly three times the original price. I did not pick 1998 because it was a good or bad year, I was only going back 30 years to give some perspective. 

Now let’s have some fun! Assume you purchased this house in 1998 and as of this month (unless you used your home as a credit card and borrowed against it), you are making your last payment. You haven’t thought much about it in the last 10 years or so due to the fact that  inflation has reduced your payment to a much smaller amount than when you first purchased your home.

In 1998, you paid a whopping 10.46% interest rate. Your payment would have been $1612.52 (this includes your payment, interest, tax and insurance, or PITI) per month for the last 30 years. Of course you may have refinanced into a lower rate along the way, but you get the idea. The average rent in California is now $2795 per month.

If you had never purchased a home in 1988, that’s what you would be paying every month with no end in sight. Compare that to the home you bought; after you pay it off, you will only owe taxes and insurance, about $230 per month (plus maintenance). 

So, is it a good time to buy?

Yep, it’s always a good time to buy. If you’re thinking of buying or selling, please contact us so we can show you how. Be prepared to stay in for the long haul, and run the race to the end.