Tag Archives: real estate

The features Americans want in their homes for 2014

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Businessweek takes a look at what Americans want in their homes in the new year. Here are a few of the trends:

-Builders says closet sizes have more than doubled in some high-end models from a decade ago. And Pulte Homes notes that walk-in closets are becoming de rigueur for even guest bedrooms.

-Three-bedroom homes accounted for 46 percent of new builds in 2012, down from 53 percent in 2009. Four-bedroom houses have grabbed 41 percent of the newly constructed home market – providing more room for aging relatives or kids who move back.

-The size of U.S. homes is growing again after declining during the recession. The latest government data show the average, newly built U.S. single-family dwelling is 2,505 square feet. That’s within a hair of the 2,521-sq.ft. peak in 2007 at the height of the housing boom.

-About half the added square footage on homes built by Pulte in the past 10 years has gone to storage space. A sign of the times: what Pulte’s director of architecture, Scott Thomas, calls “the Costco room,” a closet near the entrance from the garage that can hold all those jumbo-size packages bought at warehouse stores.

One commentator says this is the “new normal” McMansion. As household sizes have declined and more Americans are living alone, homes aren’t necessarily shrinking (though this is likely skewed by those who have money to buy new homes while the lower end of the market languishes) and people are looking for plenty of storage for all the stuff they own and are buying. So, even if these McMansions might not be as big as some past McMansions or they might be designed better and grenner, it appears consumption is still the name of the game.

The best ROI in hipster neighborhoods

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If you are looking to make some money in real estate, check out these hipster zip codes:

Real estate data provider RealtyTrac conjured some numbers to support what everyone already knows or suspects— that, as a developer or landlord, investing in rental housing in “hipster” nabes is a solid idea. Chicago gets three hits on RealtyTrac’s just-published top 25 list of hip zips for high return on rental properties, in descending rank: 60625 (Ravenswood, Albany Park); 60647 (Logan Square, Bucktown); and 60642 (Noble Square, River West, Goose Island). Yup, they got all the usual suspects. The above chart, interactive and expandable at the source, shows the equation for investment success in “nascent hipster markets”: a high proportion of 25-34 year-olds; a ready stock of renters; a low vacancy rate; and a climbing but still low median home price relative to average rents. Wouldn’t you know it— these are the basic conditions for any successful rental investment, almost anywhere. Why all the fuss over hipsters? Probably because the “culture” that follows this trendy group around usually matches up closely to rapid gentrification. In other words, it’s the hipster as beacon. For the frugal renter trying to stay away from big money, there’s a different use for this list. Stay tuned for follow-up RealtyTrac analysis on “top hipster zips for fix-and-flip profits.”

While hipster may appear to be a lifestyle choice, this article is a reminder of the economic conditions involving hipsters. They also have money and are interested in moving into less-than-perfect neighborhoods that have the appropriate grittiness and authenticity. Thus, a savvy investor might find properties in neighborhoods on the rise and with the influx of hipsters make some money.

It would be interesting to then look at how these investment work out over time. Getting in at the right point is important but how does that investment then work out over a long period of time? What happens when hipsters stop moving in or the neighborhood is no longer the hot one? We need to see not only this data but a ROI curve.

Staging a home with photoshopped furniture and features

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Here is a solution for empty homes on the market for a long time: photoshopped home furnishings.

With virtual staging, Spinelli said, she visits an empty house or one that’s in need of updating, draws on her designer talents to capture the most important rooms photographically, then stages them digitally…

One reality of selling in the digital age is that a large percentage of buyers sit at computers, sifting through hundreds of listings, to cut physical visits to a reasonable number…

“Not staging an empty house makes it look cold and less inviting, but not everyone in today’s market can afford the cost of doing so, especially when you add in the monthly expense of furniture rental,” said Schumacher, who has been using Spinelli’s virtual efforts for one of her listings, a $500,000 house owned by a couple who moved to North Carolina and left it empty.

“It is the electronic version of curb appeal,” Schumacher said, adding that activity picked up in the first three weeks of the virtual staging.

The cost is $198 an image, which comes with an unlimited licensing fee for use in brochures. On the Multiple Listing Service, the house must be identified as digitally staged.

Helping potential buyers see the home as it might be used is helpful. As one can see on numerous HGTV shows, some buyers have a really hard time seeing past the small cosmetic issues and what is possible in rooms. The furniture can help provide perspective on room size and also make a more bland room look sharper.

However, I was amused to see this story because I just saw an example of this the other day. The problem: the photoshopping was not done well and it made the pictures comical. Some issues like the lighting on the furniture versus the lighting in the room are difficult to handle (the furniture does seem to float above the floor a bit). On the other hand, if you are going to show two pictures of the living room, don’t reverse the furniture so it always faces the camera even as the angle changes. And then you wonder, are the kitchen appliances photoshopped (I don’t think so)? Can they photoshop bathrooms to show newer fixtures (which this house might need)?

Given the difficulties sometimes present in photographing homes for sale, I’ll be curious to see if this photoshop trend catches on.

Selling homes with better videos about the lifestyles they allow

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To sell more homes, some have taken to producing better videos that highlight the home and the lifestyle associated with them:

This video, and five more so far, are not your typical real estate fare. Which is just what agent Stephanie Somers, who has a background in art, had in mind.

“We are presenting a vibe, a lifestyle,” as well as a place to live, said Somers, who wanted to show the “young and vibrant people” who are buying homes in Fishtown, Northern Liberties, Old City, and Passyunk Square…

Of her videos, Somers said, “I didn’t want them to be just real estate.” She considers most property videos online these days to be pretty bland.

Among the exceptions, as the New York Times recently noted, may be the $1 million four-minute movie being produced by filmmaker Harry B. Macklowe for 432 Park Avenue, a luxury condo high-rise in Manhattan. A Wall Street Journal article reported that the budgets for such cinematic marketing efforts are often a percentage of a home’s listing price, ranging from a few thousand dollars to $1 million-plus for epic residential ventures.

Stephanie Somers said she had spent thousands of dollars of her own money on her videos, calling the results “mind-blowing” presentations that depict what people do in Philadelphia’s new hot neighborhoods – go to birthday parties, have romantic evenings, compose music.

I’ve wondered why real estate listings these days don’t include more information – it is usually some standard info and some pictures. And even with pictures online of hundreds of homes, it is hard to get a sense of what it is like being in the house and many realtors/sellers struggle to take good photos.

One interesting aspect of these videos is that they could serve to deemphasize the home and highlight the surrounding area. This gets to a classic question: which homeowners care more about the house and which care more about the neighborhood and amenities? Videos could show that both aspects are great – but this might not always be the case. Imagine a video for a fixer-upper in an unexciting neighborhood – this is one that likely wouldn’t be made in the first place.

Countering the suburban McMansion with the city “colossal condo”

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Suburban McMansions are known for their size but there is also a recent uptick in the size of condos in New York City:

At the peak of the Manhattan real-estate boom in 2007, the average new condo—from studios to penthouses—was 1,265 square feet. Now, new condos average 1,564 square feet, a 24% increase, said Kelly Kennedy Mack, president of Corcoran Sunshine Marketing Group.

The big condos, increasingly expensive and brimming with high-end details and amenities, are being built in converted garages and walk-ups, as well as part of new, ground-up construction across much of Manhattan…

“In New York, space is the ultimate status symbol,” she said.

Developers say that they are responding to the market—strong demand by the buyers in the upper end of the 1%. The new buyers, say brokers, include international clients looking for investment-grades properties, and local families, who after years of falling crime improving quality of life, want to stay in New York to raise families, or return there when their children head off to college.

Sounds like there is plenty of real estate money in New York City, whether it is for the latest offerings from Toll Brothers, big single-family homes, or large condos. Does this mean there is a bubble coming? Or, as the article goes on to note, what about housing options for the majority of New York residents?

It would be interesting to see how critics of McMansions would respond to these larger condos. Urban dwellings are often assumed to be greener and the average size of the new condo is still a couple of thousand square feet smaller than McMansions. Yet, they are quite expensive, aren’t exactly resource-free to construct, and tend to be within the reach of only a small segment of the population. In the end, are large urban condos and penthouses preferable to suburban McMansions?

Perhaps we’ll know Americans prefer renting when HGTV focuses on renting and not homeownership

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The vast majority of programming on HGTV focuses on acquiring and/or rehabbing homes. It is hard to go more than a few episodes of these shows without someone talking about the pride of homeownership or achieving their dreams. This is all very American.

But, if the housing market still isn’t great, why aren’t there more shows about rentals? The one consistent show that includes rentals, Income Property, only views the rental from the homeowner’s perspective and how much money they can extract from the rental.

A theory: we’ll know when there are more Americans who really want to rent, particularly in the key 25-49 demographic, when HGTV features more prime-time shows about renting and rental properties.

Facebook partnering to build a new mixed-use development for its workers

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Here are a few details about Facebook’s plans to help put together a new mixed-use development near its main campus:

The planned complex, designed by architecture firm KTGY Group, is the first major housing development in Menlo Park in 20 years, and is expected to open in 2016. According to Deanna Chow, a senior planner in Menlo Park’s planning department, the city is largely occupied by single-family homes. This 394-unit residential community will be the first mixed-use development of its scale in the city…

While Facebook’s investment in the complex only extends to subsidizing 15 low-income units, Anton Menlo could very well become a “Facebook Town.” Besides its proximity to Facebook’s campus, the designers also kept the company’s employees very much in mind. A series of focus groups and electronic surveys gauging employees’ needs and desires translated into amenities like a “grab & go” convenience store, sports pub, doggy daycare, bicycle repair shop, and an “iCafe” filled with community WiFi zones, printers, and office supplies. Once construction begins, St. Anton will market the apartments to Facebook employees first before opening up to the general public. The developer is also working to establish a leasing office on Facebook’s campus.

Beyond concerns about Facebook employees becoming slaves to work or the beginnings of a community made up entirely of “brogrammers,” the project is actually a much-needed step in addressing Menlo Park’s housing strain. According to a housing fact sheet from the city, Menlo Park has a “jobs/housing inbalance,” with 41,320 workers but only 13,129 housing units…

On the plus side, housing employees close to work can help reduce traffic and gridlock. In fact, the Anton Menlo project aims to make several specific transit improvements. The Facebook corporate shuttle will be adding a stop at Anton Menlo. On a mission to get people home as soon as possible, the developer is working with the city to put in a bike path that runs directly from the Facebook campus to the new complex. Also in the works are separated sidewalks, crosswalks that light up to caution cars, and an underground tunnel linking Facebook’s campus to the apartments.

So, Facebook might help alleviate some housing pressure in a community that is difficult to live in but there will be questions about this being a “company town.” There are a lot of American companies that could afford similar actions. If they provide housing for their employees without being too controlling, two good things might emerge: (1) the workers might be more productive and (2) the community could be helped. Either way, it will be interesting to watch the outcome of Facebook’s real estate development activities.

While companies might get flack about providing housing, I wonder if developers and those involved in real estate are regarded more highly for their efforts to develop housing. For example, this 2009 Harris Poll regarding occupational prestige has real estate agent/broker at the bottom of 23 occupations. Developers sometimes provide big houses people want but they can also raise the ire of neighbors whose NIMBY hackles are raised.

Good school districts give homes up to a $50 per square foot boost in value

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Redfin suggests a home located in a high-performing school district can command a higher price:

How much more do they have to pay for a home that feeds into a top-ranked elementary school as opposed to an average-ranked school? Nationally, try an extra $50 per square foot, on average, according to the data crunchers at Redfin.

In the Chicago area, the median price of a home near top-tier schools was $257,500, 58.5 percent higher than the median price of $162,500 for a home near an average-ranked school.

The findings are a jolt of reality for almost 1,000 consumers who plan to buy a home in the next two years and completed a Realtor.com survey in July. More than half of those potential buyers said they’d be willing to pay as much as 20 percent above their budget to buy a home within certain school boundaries. Apparently, that’s not enough to get into the best schools.

To do its calculations, Redfin compared median sale prices of similar homes in the same neighborhood but which fell within the boundaries of different elementary schools. The transactions studied were those that closed between May 1 and Aug. 31 — a time when home prices were showing recovery in most parts of the country — and were listed on local multiple listing services. Then Redfin boiled those numbers down into median sales prices per square foot.

An interesting experimental design – houses matched by neighborhood but in different school districts – and an interesting finding.

This reminds me of hearing Annette Lareau speak at the American Sociological Association meetings this past August in New York City. When she and her fellow researchers looked at how middle and upper-class families took schools into account when searching for where to live, they found that they were able to quickly eliminate most school districts as not being good enough. In contrast to the lengthy research these parents did regarding other areas of life, through word of mouth, they were able quickly learn what neighborhoods they would buy in.

Putting this all together, if there are only so many homes in the top school districts, buyers can ask for more and expect some competition among people who want to be part of the better school district.

Uptick in McMansion type cemetery plots and mausoleums?

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Sales of big houses are on the rise as are sales of expensive cemetery plots:

The generation that brought us the McMansion is now reviving the McMausoleum. As more boomers contemplate their final years, some are spending sums of $1 million or more to buy or build spacious resting places in exclusive historic graveyards, as Stefanos Chen of The Wall Street Journal reports this week. The result, says Chen: An eruption of bungalow-sized luxury tombs, flanked by colorful statuary (think roller skates and Fender Stratocasters) in memorial parks previously known for their grim sobriety…

For Americans, big spending on burial today is more an issue of location, location, location. Older cemeteries that already host the remains of prominent people are able to command premium prices for their dwindling supply of plots. Ray Brandt, a 66-year-old attorney, talks with Chen about his $1.1 million mausoleum in Metairie Cemetery in New Orleans—where the plot alone can cost $250,000. How do you get from there to seven figures? For starters, the lot is bigger than any New York City apartment I ever lived in, at 1,024 square feet, with resting space for 12. “There will be two sets of bronze doors, one of which will open to a back patio with picnic-style furniture and a view of a lagoon,” explains Chen. “I guess it’s the last house I’ll buy,” says Brandt.

Even boomers with smaller budgets are influencing the look and layout of cemeteries. In the Hollywood Forever cemetery in Los Angeles, one of the most common requests is to be buried near the grave of Johnny Ramone (born John Cummings), whose plot features a bust of the late punk rocker wailing on his guitar. (Ramone, who passed away in 2004, isn’t actually buried there yet, but the cemetery says his ashes will be moved there along with his wife’s after she dies.) Those who can’t be near such monument statuary are increasingly asking for equally distinctive décor, Chen reports, custom-ordering, say, a bust of a Greek warrior or a frieze of flamenco dancers.

Some thoughts:

1. I think this is a convenient story-line: boomers who like McMansions also like big burial sites. While there is an attempt in the second paragraph of the story to suggest other American generations have also liked big plots, the hook to the story is that the boomers spend excessively.

2. There is little to no data in this story suggesting there is a real uptick in the sales of these large plots.

3. Does this mean that even more than ever those with money to purchase such monuments will be remembered much more than people who choose cremation?

4. This story hints at another issue: historic cemeteries are running out of space. This means they can drive up the asking price but does it also mean they are very nearly “dead” institutions? With the rise of cremations, is there a glut of space in newer cemeteries or on the whole are cemeteries slowly easing out of existence?

Sales of $1 million plus homes back to 2007 levels

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A new analysis shows that the upper end of the real estate market, at least homes over $1 million, has recovered:

Home sales from Los Angeles to Charleston, South Carolina that are priced at more than $1 million are gaining at triple the pace of the broader market, according to real estate research firm DataQuick Inc. Wealthy purchasers, helped by gains in equities, are diving into real estate a year after a recovery began in the housing market when less-well-heeled buyers rushed to take advantage of record-low interest rates, said Susan Wachter, a professor of real estate and finance at the University of Pennsylvania’s Wharton School…

Sales of homes priced at more than $1 million jumped an average 37 percent in 2013’s first half from a year earlier to the highest level since 2007, according to DataQuick. Transactions priced at less than $1 million rose 11 percent in the same period to the highest since 2009, data from the National Association of Realtors show.

The $1-million-and-up end of the market usually trails cycles of the broader market because real estate purchases by wealthier buyers “tend to be discretionary spending” that can wait until economic conditions are right, Wachter said. Those homeowners usually can hang onto properties during tough times, and their houses are big enough for them to stay even if their families expand…

Homes priced at more than $1 million lost about 46 percent of their value during the housing crash, according to a Bloomberg survey of sales in the top four cities, based on valuation data from Zillow.com. Since then, their value has more than doubled. Home prices in the broader market fell to $154,600 in early 2012 and increased to $214,200 in June, according to the Realtor’s group.

At least one part of the market is doing well (the lower end is not doing as well): some expect homeownership rates in the US are expected to fall into next year.

I wonder if another reason these homes are selling at such a rate includes a perception that real estate is a good investment at this point, particularly compared to other investment opportunities that are more uncertain. This would assume that home prices would rise consistently but it would also help explain why so many investors are purchasing real estate.