A penny for my thoughts, oh no I’ll sell them for a dollar

They’re worth so much more after I’m a goner
And maybe then you’ll hear the words I been singin’
Funny when you’re dead how people start listenin’

~The Band Perry

Last week the real estate community lost an icon.  Carole Rodoni was an economist, a real estate guru and the toughest sub five foot woman you will have ever met.  I know real estate and I’m smart, I bowed to her insight.  She was the President of Fox and Carskadon, COO of Cornish and Carey and the President of Alain Pinel Realtors.  Most Realtors were not qualified to have a conversation with this little fireball.  Whenever I asked her a question I was always mindful to not sound like this guy.

Isn’t it true….and I would be the worm.

She gave out some of the best real estate advice I’ve ever received.  She understood how the bay area worked and how the world worked.  She would start with a view of the world’s economic situation and chunk it down to the United States and then chunk it down to California and ultimately to the bay area and Contra Costa County.

I would have liked to have heard her thoughts on the tariffs.  I am deeply concerned that they are the canary in our collective coal mines.  Most go into effect starting October 1, 2018.  I’ve had business owners tell me that their cost of goods will be going up.  Spun Bicycles in Cincinnati has received notice from several providers that various bicycles are parts will be going up in cost by 25%.  I spoke to the owner of Chase Customs who told me that a roll bar that used to cost around $350 was now costing him $700.  Steel parts were already doubled in price in some situations.

Our economy is not strong enough to withstand this kind of rise in COG and I am doubtful that it can continue to grow under that pressure.

We are used to Presidents who negotiate in a certain manner.  I believe this President is a brash, bare knuckles type of negotiator and that’s what is happening right now.  He is blustering to get the Chinese to the table and the tariffs will not ultimately be in effect long, if at all.  If I am wrong, we could be in for a long cold winter.  I wish I could give Carole a penny for her thoughts on tariffs.  She will be missed.

 

Waiting on the world to change

It’s hard to beat the system
When we’re standing at a distance
So we keep waiting
Waiting on the world to change

~John Mayer

I hear it all of the time.  We’re going to wait.  Wait to buy, wait to sell, wait for the real estate world to change.  I get it.  No one wants to make a mistake with the largest financial transaction of your life.  And adulting is scary, right?

The thing is, in this world there is a cost for everything.

Just last week I took one of my cars into the shop.  The air condition wasn’t working.  It’s not my daily driver, but my daily driver has proven to be a little unreliable.  It’s brand new and has spent 11 days of it’s first year in the shop.  It needs to go in again because the seat belt chime won’t quit bleating at me.  So I took my steady Eddie into the shop to get the air conditioner looked at.  That car has an oil leak that is going to take a day’s worth of work to correct.  That’s an expensive job and I’ve been putting it off for two years now.  Well, there’s a cost for procrastination.  In my case it was a hose in the air conditioning system that rotted out because oil was dripping on it…from the oil leak I put off fixing.  The cost of procrastination for me was $400.  I might as well have dropped that $400 in the street and set it on fire, because had I fixed the oil leak when it was discovered, the air conditioning would have never failed.  The cost of waiting.

Ten years ago when I moved into my home I installed an air conditioner at my house.  I rescue dogs and always have at least one male dog here.  Apparently air conditioners are a big deal with male dogs.  Once they lift their leg on it, the unit warms up when it’s being run and their scent goes all over the neighborhood.  It’s a four legged win/win.  And it will rot out an air conditioning unit in about 8 years.  I could have built a fence around it, or hosed it off weekly and that would have saved it.  I never got around to it so I got to spend another $11,000 replacing the entire system because the old kind of freon systems have to be completely replaced.  The cost of waiting.

Now I get waiting.  I’m have it down to expert level.  It’s not always the best course of action.

Bay Area homes are expensive.  Ridiculously expensive.  Buyers want to wait to buy because they think prices are going to come down.  Sellers want to wait because they think they’re going to keep going up.  I’m going to suggest that the cost of waiting can be insurmountable.

I could tell stories about buyers who wanted to wait for the market to cool in 2013 and are now completely priced out of the market and will probably never own unless they have some windfall in their lives.  Or sellers that wanted to wait in 2006 and ended up loosing their home to foreclosure in 2009.

Hi, I’m a Procrastinator and I like buying air conditioning equipment.

I don’t.  I hate buying air conditioning equipment.  And I hate watching people make decisions that I know are not going to benefit them in the long term.  After all, with very few exceptions, people who own real estate have 36 times the average net wealth that renters have.  Thirty six times!

Part of that is that homeowners are creating equity with every house payment as opposed to making their landlord wealthy with every rent check.  I don’t know how the new tax law is going to affect the mortgage interest deduction (which you can thank me and every other dues paying Realtor member of the National Association of Realtors who fought to keep that deduction in place) and property taxes going forward, but there are still deductions available to homeowners that renters don’t get to benefit from.

OK, so what is the real cost of waiting.

Factors:

  1. Interest rate
  2. Cost of purchase
  3. Tax benefits

Current interest rates are hovering around the high 4’s.  We’re going to use 5% for this example.  And we’re going to use Bay Area prices.

The median price in the Bay Area is hovering around $900,000.  I know, that’s nuts.  There are plenty of homes in other price points in the Bay Area.  Buyer has 5% down so it’s going to be a jumbo loan with PMI.  The total amount to close this is going to be around $72,000.  The payment is going to be around $4,589.82.  Taxes are going to be around $10,000 a year and there is going to be PMI (private mortgage insurance) on the loan at around $335.00.  The house payment is going to be around $5760.  Over a period of two years, this loan will pay down to $827,990.74 adding around $22,000 to your equity.  Now you have around 7.5% equity, plus you’ve been receiving the tax benefit for two years.  What if the market goes up?  Yay!  More equity.  What if the market goes down?  Boo, your equity disappeared, but you’re still living in your own place and no one (except the City) can tell you what to do with it.  You keep paying your mortgage and the market recovers after a long arduous five year wait and the market starts running again.  Yay!  You’ve paid it down to $783,817.23 in your first five years and can probably dump the PMI.  Yay! Again!  And for those five years you’ve been writing off all of your deductions on the home.

Now let’s say you’re the seller.  You want to wait to next year because you want to squeeze every penny you can out of it.  After all this is the Bay Area and it will keep running….right?  Well maybe not.  The same guy who bought the home above could qualify for the large loan today, but interest rates returned to the historic norm which is 6%.  Now that payment is $5126.16 plus $335 PMI and $833 in taxes and that buyer just can’t afford your home any more.  Now you aren’t average and there is pressure on the market and what was $900,000 this year is barely $800,000 because they can only qualify for a $755,000 loan.  That buyer isn’t going to buy that home any more, they’re looking at a smaller home and as a seller, that seller is feeling the downward pressure on the market.

There is a cost of waiting.  Sometimes, it is appropriate.  Sometimes it’s misguided and will ultimately doom someone’s hopes and aspirations.  Don’t let that happen to you.  Find out what you can, can’t, should and should’t do right now.  Call or text 925-381-2998

Will you still need me, will you still feed me

Several of my clients celebrated birthdays over the weekend.  I was lucky enough to speak or see quite a few of them.  As each of us takes another trip around the sun, the truth is we’re all getting older.  And that beats the hell out of the alternative.

Roughly 10,000 baby boomers are going to turn 65 today.  Another 10,000 will turn 65 tomorrow.  And so on.  Our population is growing older and as they do, they need help.  Some may not need help at 65 or even 75, but there will be a point where they need assistance.  Maybe they can no longer safely get in and out of their shower or bathtub.  Maybe they forgot whether or not they had lunch.  Interesting fact, seniors tend towards dehydration because they forget to drink water.  Many falls are the result of undiagnosed UTI’s.  Once someone falls and breaks something, the road back can be long and difficult.  Each of my parents fell and broke a hip.  My father spent the night on the floor because no one could help him up.  Scammers prey on our seniors.  They become lonely and the scammer knows how to be of comfort…right before they get their checking account information.  There is now the Sandwich Generation.  Those folks still have to work, they have kids either still at home or are paying for college and their parents are retired and need help.  The weight can be crushing.

While my father was alive, my mother was able to care for him.  We did not know that my mother was suffering from Alzheimer’s disease.  She was a very intelligent woman and hid her symptoms eloquently, until one day she couldn’t any more.  With my father gone my brother and I struggled to balance work, life and making sure our mother didn’t 1) burn down the condo complex 2) wander away 3) give her credit card to a scammer 4) let a scammer into the house (I called one day and she said she couldn’t talk that the vacuum cleaner salesman was vacuuming the rug.)  Add to that a plethora of things we could not begin to predict.  It was stressful.  We cooked meals in advance for her so we knew she had good food to eat.  We checked on her daily to be sure she hadn’t “fallen and couldn’t get up”.  We took phone calls that barely made sense.  I canceled my New Year’s Eve plans to take her to the hospital because she fell that night.  I left events and parties because she called confused and if I didn’t I had no idea what crazy thing she was going to do next.  She called me at 5:30 in the morning to tell me not to worry she was getting a ride to the hospital with the firemen.  She wasn’t hurt, she called 911 got an ambulance ride for an old shoulder injury.  Her mind was gone but she could still dial a phone.  That doesn’t count the times I was out of town and my brother dropped everything to ferret out what was going on in her failing mind.

If any of this sounds familiar, I’m with you.  I get it.  Been there.  Done that.  Got the t-shirt.

Mom is still with us, living in a memory care facility, which in our case was the best decision to keep her safe.  Each family has different dynamics and different abilities.  In our case, everyone has to work to keep our own families afloat so keeping her in place or having her move in was not an option.  For some families, that’s the perfect option.  Sometimes that’s the sweetest time together.  Sometimes in home care is the solution.  We did that until it was not enough.

One of the resources we used was Senior Helpers in Concord.  Jenny’s staff took great care of my mother after she broke her hip and going forward until it was time to place her.  Jenny even helped us place my mother in the best place possible and helped us with the details of the best way to move an Alzheimer’s patient.  (Hint: it’s not easy).

Another resource I wanted to share was the VA.  If your senior is a veteran the VA has a program to give you a respite of 16 days if the family is the primary caregivers.  The vet goes into the VA for up to 16 days and that gives the family a break.  Sometimes it’s just a mental break, sometimes having the senior out of the house allows for deep cleaning or flooring to be replaced that would otherwise be impossible.

The bottom line, no matter how unique your situation, you’re not alone.  There are resources to help you honor your loved ones as they age.  I can be reached at 925-381-2998.  I would be pleased to connect you to reputable folks who can help your loved one.