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      Blog :: 2020

      Are Home Prices Headed Toward Bubble Territory?

       Are Home Prices Headed Toward Bubble Territory? | MyKCM

      Talk of a housing bubble is beginning to crop up as home prices have appreciated at a rapid pace this year. This is understandable since the appreciation of residential real estate is well above historic annual averages. According to the Federal Housing Finance Agency (FHFA), annual appreciation since 1991 has averaged 3.8%. Here are the latest 2020 appreciation numbers from three reliable sources:

      It’s easy to jump to the conclusion that house appreciation is out of control in today’s market. However, we need to put these numbers into context first.

      Inflation and the Comeback from the Housing Crash

      Following the housing crash, home values depreciated dramatically from 2007-2011. Values are still recovering from that unusually long period of falling prices. We must also realize that normal inflation has had an impact.

      Bill McBride, the founder of the well-respected Calculated Risk blog, recently summed it up this way:

      “It has been over fourteen years since the bubble peak. In the Case-Shiller release today, the seasonally adjusted National Index, was reported as being 22.2% above the previous bubble peak. However, in real terms (adjusted for inflation), the National index is still about 2% below the bubble peak…As an example, if a house price was $200,000 in January 2000, the price would be close to $291,000 today adjusted for inflation.”

      The COVID Impact on Home Prices

      The pandemic caused many households to reconsider whether their current home still fulfills their lifestyle. Many homeowners now want larger yards that are both separate and private.

      Their needs on the inside of the home have changed too. People now want home offices, gyms, and living rooms well-suited for video conferencing. Barbara Ballinger, a freelance writer and the author of several books on real estate, recently wrote:

      “While homeowners continue to want their outdoor spaces that offer a safe retreat, that appeal has shifted into other parts of the home, coupling comfort with function. In other words, homeowners want amenities for work and leisure, and they plan to enjoy them long after the pandemic.”

      At the same time, concerns about the pandemic have caused many homeowners to put their plans to sell on hold. Realtor.com just released their November Monthly Housing Market Trends Report. It explains:

      “Nationally, the inventory of homes for sale decreased 39.2% over the past year in November…This amounted to 490,000 fewer homes for sale compared to November of last year.”

      More people buying and fewer people selling has caused home prices to escalate. However, with a vaccine on the horizon, more homeowners will be putting their houses on the market. This will better balance supply with demand and slow down the rapid appreciation.

      That’s why major organizations in the housing industry are calling for much more moderate home appreciation next year. Here are the most recent forecasts for 2021:

      This Is Nothing Like 2006

      Finally, let’s put to rest some of the concerns that today’s scenario is anything like what led up to the last housing crash. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), explains why this is nothing like 2006:

      “Such a frenzy of activity, reminiscent of 2006, raises questions about a bubble and the potential for a painful crash. The answer: There’s no comparison. Back in 2006, dubious adjustable-rate mortgages taxed many buyers’ budgets. Some loans didn’t even require income documentation. Today, buyers are taking out 30-year fixed-rate mortgages. Fourteen years ago, there were 3.8 million homes listed for sale, and home builders were putting up about 2 million new units. Now, inventory is only about 1.5 million homes, and home builders are underproducing relative to historical averages.”

      Bottom Line

      Most aspects of life have been anything but normal in 2020. That includes buying and selling real estate. High demand coupled with restricted supply has caused home prices to appreciate above historic levels. With the end of the health crisis in sight, we will see price appreciation return to more normal levels next year.

      Covid Fatigue


      I'm so over COVID-19. I hate it! It has been too long, too depressing. It makes me sad at times. It frustrates me, restricts me, annoys me. At times it drives me nuts! I want to see people's smiles again. What I thought at first might be a few weeks' lockdown has extended itself well beyond anyone's expectations. And now a massive surge of new cases, hospitalizations and deaths is enough to make anyone want to give up.  I think most of us are suffering from some form of COVID fatigue - or COVITIGUE - but now is NOT the time to quit or let down our guard.

      "It is not enough that we do our best; 

      sometimes we must do what is required."

       ~~ Winston Churchill

      In fact, now is the time to be even MORE vigilant and disciplined about doing our small but important part in slowing the spread and keeping our fellow humans - and ourselves - safe. Why? Because we - the lucky ones who did not get sick or die - have the CERTAINTY that the path to resolution has begun with last week's announcement of the first effective vaccine. The POST-COVID ERA has officially commenced. Now it is up to us - everyone - to participate in the really 'dumb, basic' actions that we know are effective in slowing the spread: masks, hand-washing and distancing. While we may be 'over it' or depressed or fatigued, let's remember those before us who fought wars and at the time when all others may have quit, they did not. They persevered under much, much worse circumstances. They continued fighting. They did their part. Everyone participated for the greater good.

      This all too shall end. We can now see a finish line on the not-too-distant horizon. But we must exercise patience, prop one another up and encourage one another to persist to that finish line.  Six months ago we could not see this finish line, but now we can. Let's not squander a golden opportunity - and our responsibility - to help minimize the damage from this awful moment in time. Let the incentive be the remarkable coming 2021 economy and life we will probably enjoy and appreciate much more than we could have in 2019.

      Have a MAGNIFICENT Monday!

      Compass Contemplations for Thursday


      DID YOU KNOW? Nearly 25% of homebuyers between April and June bought houses priced at $500,000 or more, up from 14% of buyers during the preceding nine months, according to a report from the NAR. Most jobs lost during the pandemic were lower-paid jobs, an audience that usually does not qualify to buy a home. (WSJ)

      “The mortgage buyers that we’ve worked with have really unfortunately been cut out of the deal in many cases on the homes that they’ve wanted,” - Jack Sarsen, COMPASS Greenwich, speaking to how in a super-heated market all-cash buyers have had a tremendous advantage over those seeking a mortgage. (WSJ)

      DID YOU KNOW?  If you wanted to watch three important economic touch-points over the next few weeks, look closely at:

      1.  The potential for a constitutional crisis around the contested election.

      2.  The massive spike in COVID cases, hospitalizations and deaths. 

      3.  The Senate. The result could impact the size of a new stimulus bill that appears essential to weather the next few months before a COVID vaccine has been widely distributed.

      DID YOU KNOW?  Of the 10 largest cities in the USA, Dallas has the most workers returning to the office, around 41%. (Bloomberg)

      DID YOU KNOW?  There may be a workaround to the $10,000 SALT deduction cap on state and local taxes when it comes to state and local taxes paid by pass-through entities.   

      DID YOU KNOW?  Goldman Sachs is forecasting 5.3% US GDP growth in 2021 versus the wider consensus of 3.8%....mostly due to the vaccine news.

      Real Estate Market Gridlock

      What is worse in real estate than a market where buyers feel prices are too high and don't raise their bids and sellers think prices are not high enough and are not willing to negotiate?  Gridlock markets are possibly the most frustrating for agents.....and the consumer.

      In the past few years in numerous areas around the country negatively impacted by the SALT tax deduction limitation, many homeowners were simply unable to sell their large home with high real estate tax bills. The devaluation that happened by this gridlock - mostly in some suburbs - was astounding. It also put lives and planning on hold. New COVID-related demand re-awakened and unlocked these stagnant and de-valuing markets, a combination of new interest in larger homes outside of large cities as well as pricing that had become super-attractive....and much lower than three years before when the valuation decline began. There is one upside to gridlock: With far fewer actions/transactions, no clear pricing trends register.  Unfortunately, the few transactions that do happen can often register large price declines and sway averages, something that drives valuation perceptions. This too can create demand. Like all gridlock moments, sooner or later they end too and after a period of gridlock, a wave of activity can be unleashed, mostly via perceived value. 


      Gridlock is frustrating for everyone: buyers, sellers, and agents. A free-flowing market with a healthy balance between buyer and seller expectations is the best kind, but very rare. So is gridlock good? I don't think so. Holding up people's lives is never a good thing in my humble opinion. Unfortunately, these gridlock markets do and will continue to happen....and then like all markets they too will unlock.


      Compass Contemplations For Monday

      DID YOU KNOW? Weekly Gallup polls in the U.S. found 91% of respondents said they had worn a mask in the past 7 days in September, compared with 80% in May. In France, which is experiencing a MASSIVE Covid surge, 72% of people said they were avoiding gatherings and face-to-face meetings as of mid-May, right after the country’s lockdown ended. But by Sept. 23rd, that figure had fallen to 32%. In the same time frame, the percentage who said they greeted others without shaking hands or embracing fell from 88% to 69%. Covid-discipline-fatigue is real and is causing massive new case spikes and deaths in the US and Europe. This is a marathon, not a sprint:  please remain disciplined about keeping distance, wear masks, keep rooms well ventilated and wash hands. (WSJ)


      DID YOU KNOW? According to a survey commissioned by optical retailer Vision Direct, people’s average daily screen time has ballooned to more than 19 hours a day when accounting for viewing multiple devices at once (you know who you are). If this pace continues, a newborn with an average life expectancy will spend nearly 58 years bathed in the glow of laptops, smartphones, televisions and whatever screens 2048 brings. Want to know where the consumers' eyes are: now you know..... (WSJ)

      DID YOU KNOW? Zoom use jumped from 10 million a day in December 2019 to more than 300 million a day by late March. (WSJ)

      DID YOU KNOW? American households watched 4 billion more hours of television in 2020 versus 2019.

      DID YOU KNOW?  Disruption is not a new thing at all..... This past weekend in 1861 Western Union completed the first transcontinental telegraph line across the US, making nearly instantaneous cross-country communication possible for the first time. Previously, it took 10 days for a letter to be sent from Missouri to California via the Pony Express.....two days later the Pony Express shut down operations.

      Is it Time to Move into a Single-Story Home?


      Is it Time to Move into a Single-Story Home? | MyKCM

      Once the kids have left the nest, you may be wondering what to do with all of the extra space in your home. Chances are, you don’t need four bedrooms anymore, and it may be a great time to sell your house and downsize, maybe even into a single-story home. You’ve likely gained significant equity if you’ve lived in your home for a while, so making a move while demand for your current house is high could be your best step forward toward the retirement goals you set out to achieve several years ago.

      The dilemma, though, is where to go next. A big concern for many homeowners who are ready to sell is finding a home to move into, given today’s lack of houses available for sale. There is, however, some good news: the number of single-family 1-story homes being built today is on the rise, improving your odds of finding the right home for your changing needs. In a recent article, The National Association of Home Builders (NAHB) explains:

      “Nationwide, the share of new homes with two or more stories fell from 53% in 2018 to 52% in 2019, while the share of new homes with one story grew from 47% to 48%.”

      Here’s a map showing the breakdown of newly constructed homes being built by region, and the percentage of 1-story and 2-story homes in that mix:Is it Time to Move into a Single-Story Home? | MyKCM

      What are the benefits of buying a one-story home?

      Still not sure about buying a single-story home? An article from Home Talk covers several advantages of switching from two floors to one:

      1. Energy Efficient

      “It is easier to heat and cool a single-story house [than] it would be to regulate the temperatures of a multi-story house.”

      Most single-story homes only need one heating or cooling unit, and they typically stay cooler than a two-story home, both of which can lead to significant savings.

      2. Easier to Maintain

      “Doing a general cleaning in a single story requires less effort and you will be able to see all areas that need cleaning and the areas are easily accessible.”

      Cleaning and maintenance of a single-story home can take less time and effort, and better upkeep helps improve the overall value of the home.

      3. Accessible for Everyone

      “A single-story house can be accessed by anyone, whether they are young children or the senior citizens.”

      If you’re looking for a house that provides a safe and easily accessible environment at any age, a single-story home may be optimal.

      4. Good Resell Potential

      “When buying a single-story house, you should consider the resale value should you think of reselling it in case of a circumstance that can happen. Look at the growth rate of that area. Due to the high demand of these types of houses it is [easy] to resell them and depending on the growth rate of an area, it increases in value significantly.”

      Single-story homes have a lot of benefits and are often in higher demand. This bodes well for future resale opportunities.

      Bottom Line

      There are many benefits to downsizing into a one-story home. Doing so while demand for your current house is high might make it easier than ever to make a move. Let’s connect if you’re ready to purchase the single-story home you need while homes are so affordable today.



      Buying a Home During a Pandemic

      Buying a home is likely one of the largest investments many of us will make in our lifetime. After
      years of saving, planning, and budgeting, you may feel prepared and even excited to begin your
      first home-buying process. However, with the outbreak of COVID-19 and the overwhelming
      effect that it has had on economies across the world, the real estate market has been inevitably
      impacted as well. That said, you may be wondering how this will affect your home purchase.
      Unexpectedly, while several industries have been declining from the pandemic, the real estate
      industry has managed to stay afloat and in some cases, grow during the pandemic. So the
      question is; as a buyer, what benefits will you gain from purchasing your home now?


      Less Competition

      As you may have already found out, house hunting in large cities and popular suburban areas is
      not always a walk in the park because of the intense competition that many homebuyers face.
      Finding your ‘perfect’ home may have been more of a dream than reality after comparing prices
      and battling offers with other prospective buyers. However, the outbreak of COVID-19 has
      actually driven less competition within the market in certain areas.


      Consumer Reports recommends thinking outside of the box when it comes to your house search
      locations. In some cases, you are able to find the gem that matches your needs in a location
      where you weren’t expecting to look initially. These areas often drive less competition because
      so many homebuyers are naturally feeling uncertainty from the pandemic, so they are less likely
      to take a risk when buying a home and expand outside of their range of comfort.

      In a general sense, social distancing mandates and limited travel have caused many to
      postpone their house hunt, making it one of the best times to jump in.


      Virtual and Online Capabilities

      Many prospective buyers have even postponed their house search because of the assumption
      that they will not be able to tour houses or do walk-through inspections. As we know, this limited
      in-person contact is to ensure the safety of everyone. However, it shouldn’t be a reason to stop
      the search. There are many technology-based options that work to make the buying process as
      comfortable as possible even during a pandemic.


      The housing market overall had already begun its transition to technology-based services in
      recent years and tech has become a necessity for the survival of the market this year. Home
      buying transactions like mortgage preapprovals, loan financing, and closing on a home can all
      be conducted through digital lenders and virtual services. Even if you already own a home,
      refinancing with no-closing-cost can be achieved more efficiently through digital lenders.

      Especially with the industry being forced into virtual services, digital lenders are more likely to
      introduce automation into their processes to provide more efficiency. Automation systems like
      robotic process automation (RPA) help to make significant operational improvements in lending
      which in return, produces fast, quality processing for you as a buyer.
      Lower Interest Rates & Housing Prices


      One of the most attractive parts of the real estate market currently is the low-interest rates on
      mortgages. In the early part of this year, interest rates actually dropped below 3% for the first
      time in 50 years. While these rates are expected to fluctuate in the coming months, it can still be
      a good idea to take advantage of them while they are here.


      However, while the interest rates are decreasing, housing prices are still rising. Instinctively,
      most of us see this as a deterrent from buying a home. However, before making that
      assumption it’s recommended to conduct more research on the trends of the market. Why? With
      less competition, some might argue that the market prices will increase in the coming months as
      quarantine mandates are lifted and a vaccine is publicly distributed. Prospective buyers who
      postponed their house hunt will rejoin the market, causing a greater demand and inevitably
      higher market prices. So before completely shying away from purchasing your home during the
      pandemic, be sure to keep an eye on the market and how prices are changing over time to be
      sure you are making effective financial decisions.


      Navigating such a challenging yet rewarding stage of life through a pandemic can take an
      immense amount of strategy and patience. Be sure to keep in mind these benefits of continuing
      your search through the pandemic and take advantage of them where you can. By investing
      time and research into these tips, you can leverage the best components of your local housing
      market during such an uncertain time.

      9/11- 19 Years Later

      Today, 19 years ago, multiple terrorist attacks killed nearly three thousand people in New York, Pennsylvania and Washington DC, and caused billions of dollars worth of damage resulting in an enormously expensive re-building and a $6 trillion war that resulted in thousands more lost lives. This horrific event triggered enormous changes around the globe. Here are some observations.

      1.  The Pentagon in Washington DC was fully restored and repaired. In Manhattan it's difficult to believe this horrific event happened almost two decades ago......but it's so invigorating to see what has happened since then. The Lower Manhattan Renaissance is a sight to behold: Multiple towers and a museum and memorial have been built, including a sensational Santiago-Calatrava designed World trade Center transportation hub that has become an instantly recognizable and unique New York attraction. Today Lower Manhattan's population has almost tripled to 62,000. and the number of residential housing units has spiraled past 30,000 units.

      2.  The economy did not stop: US GDP was about $10.5 trillion in 2001: last year it was more than double.

      3.  Air travel was transformed with a whole host of security measures that have become 'expected' and 'normal' today.

      4.  Surveillance increased dramatically. Most large cities have security cameras everywhere and new high tech solutions have made cities much safer.

      5.  The world collectively realized safety and security would always have to be a top priority of governments, cities, towns, villages.

      6.  The unity in the USA felt directly post-9/11 is something we should all remember and try to re-produce. A united front against adversity is always more effective.

      7.  We were reminded how important firefighters are in our world. We are reminded of that again now as they battle wildfires in the West.

      8.  We CAN learn from history if we choose not to forget or ignore realities and data points that provide us clear intelligence and insights.

      9.  With anything catastrophic, we learn how there are always warning signals before they happen. Responding to those may appear paranoid to some, yet we should weigh the cost of paranoia against the cost of recovery. It's usually a fraction.

      If there is one important lesson to be learned from 9/11 it is that we as a human species evolve, learn and adapt. We rebuild and restore. We invent and innovate. At a time like this when so many are unemployed, homeless, sick, grieving and the USA has suffered a truly awful few months, we can look back to 9/11 to be CERTAIN we will recover from this moment and soar well past it. 

      I know someone well who ran down fifty flights of stairs from the south tower of the World Trade Center and exited the building just as it was crumbling.....he walked home for over an hour covered in dust and debris, bloodied from flying glass. When he arrived home, the phone rang. It was his real estate agent: "I have a full price offer on your apartment!" He responded by saying it was not the best time to speak, hung up and the phones went dead for a week. He re-connected with his agent then and she had another offer over the ask..... Life goes on. It always has and it always will.


      The Top Reasons People Are Moving This Year



      The Top Reasons People Are Moving This Year | MyKCM

      Today, Americans are moving for a variety of different reasons. The current health crisis has truly re-shaped our lifestyles and our needs. Spending extra time where we currently live is enabling many families to re-evaluate what homeownership means and what they find most important in a home.

      According to Zillow:

      “In 2020, homes went from the place people returned to after work, school, hitting the gym or vacationing, to the place where families do all of the above. For those who now spend the majority of their hours at home, there’s a growing wish list of what they’d change about their homes, if possible.” 

      With a new perspective on homeownership, here are some of the top reasons people are reconsidering where they live and making moves this year.

      1. Working from Home

      Remote work is becoming the new norm in 2020, and it’s continuing on longer than most initially expected. Many in the workforce today are discovering they don’t need to live close to the office anymore, and they can get more for their money if they move a little further outside the city limits. Lawrence Yun, Chief Economist for the National Association of Realtors (NAR) notes:

      “With the sizable shift in remote work, current homeowners are looking for larger homes and this will lead to a secondary level of demand even into 2021.”

      If you’ve tried to convert your guest room or your dining room into a home office with minimal success, it may be time to find a larger home. The reality is, your current house may not be optimally designed for this kind of space, making remote work and continued productivity very challenging.

      2. Virtual Schooling

      With school about to restart this fall, many districts are beginning the new academic year online. Education Week is tracking the reopening plans of schools across the country, and as of August 21, 21 of the 25 largest school districts are choosing remote learning as their back-to-school instructional model, affecting over 4.5 million students.

      With a need for a dedicated learning space, it may be time to find a larger home to provide your children with the same kind of quiet room to focus on their schoolwork, just like you likely need for your office work.

      3. A Home Gym

      Staying healthy and active is a top priority for many Americans. With various levels of concern around the safety of returning to health clubs across the country, dreams of space for a home gym are growing stronger. The Home Builders Association of Greater New Orleans explains:

      “For many in quarantine, a significant decrease in activity is more than a vanity issue – it’s a mental health issue.”

      Having room to maintain a healthy lifestyle at home – mentally and physically – may prompt you to consider a new place to live that includes space for at-home workouts.

      4. Outdoor Space

      Especially for those living in an apartment or a small townhouse, this is a new priority for many as well. Zillow also notes the benefits of being able to use yard space throughout the year:

      “People want more space in their next home, and one way to get it is by turning part of the backyard into a functional room, ‘an outdoor space for play as well as entertaining or cooking.’”

      You may, however, not have the extra square footage today to have these designated areas – indoor or out.

      Moving May Be Your Best Option

      If you’re clamoring for extra space to accommodate your family’s changing needs, making a move may be your best bet, especially while you can take advantage of today’s low mortgage rates. Low rates are making homes more affordable than they have been in years. According to Black Knight:

      “Buying power for those shopping for a home is up 10% year over year, with home buyers able to afford nearly $32,000 more home than they could have 1 year ago while keeping their monthly payment the same.”

      It’s a great time to get more home for your money, just when you need the extra space.

      Bottom Line

      People are moving for a variety of different reasons today, and many families’ needs have changed throughout the year. If you’ve been trying to decide if now is the time to buy a new home, let’s connect to discuss your needs.


      Compass Contemplations for Monday

      Good morning,

      Wishing all of those in California, particularly in our Compass family,  well,  who are experiencing a heatwave and wildfires. Death Valley near the border of Nevada recorded a temperature of 130 degrees! 

      DID YOU KNOW? More than 25% of U.S. colleges plan to begin fall instruction fully or mostly online, but many are still opening up their dorms. Some are limiting space to those students with housing insecurity or other hardships. Some, like Washington State University in Pullman, Wash., plan to offer housing to students who fit into a number of defined categories, such as veterans or those with on-campus jobs. Other online-only campuses, like the University of California, Berkeley, say they’re still accepting housing applications. Some may change plans at the 11th hour, as the University of Massachusetts, Amherst, did less than 3 weeks before classes were to begin, with an announcement that it would no longer allow students whose classes are held remotely to move into the dorms. (NY TIMES)

      DID YOU KNOW? Fewer Floridians filed for unemployment last week than any other week since mid-March, a hopeful sign. Leisure and hospitality accounts for 40% of the USA’s long term pandemic unemployment. Destinations Florida showed tourism revenue was down more than 80%. Tourism is roughly a little under 3% of US GDP.....but in Florida, it's closer to 10%. Tourism generated roughly $26 billion in tax receipts in 2018 in Florida which helps fund schools, improve healthcare and supports other government services.

      DID YOU KNOW? Commercial real-estate loans make up around 22% of U.S. banks’ total loans. 
      For the 5 years preceding the beginning of the pandemic, global commercial real-estate investment ran to around $1 trillion a year. We might all wish for a return to the office for this reason alone..... (WSJ)

      DID YOU KNOW? In Hong Kong, CBRE expects a fall of more than 15% in top-tier office rents this year. The combination of political unrest and COVID are driving this. (WSJ)

      Where Did All The People Go?


      As I walk the streets of Manhattan, a question I hear asked repeatedly is: "Where are all the people?" This same question is being asked around the globe in larger towns and cities, more so in some areas than others. So I did a little research to help explain this highly unusual moment.....and this is what I discovered:

      1.  Big Cities are often NOT mostly locals.  Most bigger cities attract vast numbers of tourists and visitors, domestic and international. New York City attracts around 60 million people annually......that's around 5 million per month or 160,000-400,000 per day.  Cities like Chicago, Atlanta, Los Angeles, San Francisco, etc also attract huge numbers of visitors and tourists. Miami attracts over 23 million per year. That's a lot of people and most of them cannot or don't want to travel right now.

      2.  Big Cities attract tons of daily commuters. Manhattan alone attracts about 1.6 million workers per day. Many come from outside the city. Most larger cities don't house the majority of workers and these days many are working remotely.

      3.  Big Cities have big colleges and schools......most are shut right now for the Summer and COVID-19 precautions.

      4.  Big City dwellers house many residents with second homes or those who escape for a few weeks in the Summer. They are also out of cities right now.

      Add up the above and it's easier to understand why larger cities around the globe are not quite the same right now. But this will change. It's a matter of time. Not if, but when. Some say things will never be the same again, and I agree with that to a certain degree: Chances are we'll never again take for granted those (sometimes annoying) throngs of visitors, tourists, students, etc that are a critically important part of the fabric of the places we call home.....they are the VOLUME that drives commerce, jobs, growth and LIFE!

      Have a Magnificent Monday!

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