The Second Home Muse

Things to Think About Before You Move

It's easy to feel that there's a better place somewhere else...especially when you see the value of your house rise, the property taxes go up as well, and you know you could buy an even better place for a third of the price...elsewhere. But as a great article by Susan Swartz, a writer for the Press Democrat points out, we don't really move just for the house. Moving is "about context and culture, values and community," she writes.

That's why it is so important to take to heart the advice about spending vacation time in places where you plan to buy a second (or primary) home. What's it like in the winter? How far are the cultural events you want to enjoy? What's the transportation like? Where's the nearest Whole Foods or Trader Joes? Seems obvious, but so often we can get distracted simply by the economics of it all. In today's market, where you are surely bringing in way more than you paid for your house, the idea of putting the money into a house that needs no mortgage is surely an appeal, especially if you are retiring. But do look before you leap... that same high price you get to sell your house, is what you'll have to pay if you change your mind and want to return to where you started. And that will not be fun.

Investing in Houses

While all the numbers get bantered around regarding the housing market, it was refreshing to read a recent article in the New Yorker Magazine that goes a bit deeper. It poses the question, 'What does that median home price tell us anyway?' I have long believed the number was highly over-rated as an indicator. As the New Yorker article points out, when we compare August 2005 to August 2006, for example, we are comparing completely different sets of houses. So if only the expensive ones sold, or, vice versa, only less ones sold, you don't really see how prices are changing across the board. The article points out that there are statistics that track how the same house has fared from sale to sale.

However, even more interesting is the question of whether housing prices have been increasingly rising. For one thing, they point out that if you adjust for quality of home, prices between 1977 and 2003 reduced the return to sellers figure by 40%. If you adjust for inflation, prices were 8% lower in 1991 than 1979. And if you adjust for the give-aways that sellers are offering, the price increase is also less. The main point is that declaring that prices have not fallen for a straight year since the Depression is just not accurate. If we could get better on tracking accurate information, then the ups and downs would be far better understood, and make us much wiser investors, buyers and sellers. My recommendation: read the New Yorker article.

Housing Market: Yes or No?

What's a guy to think? Yesterday, driving home, the radio was quoting a government official: "The economy is strong. The housing slump is simply a much needed correction to create a sustainable growth rate." Sounds good to me. Then today, I read the headlines, "The economy grew more slowly in the third quarter than at any time since early 2003, held back by a deflating housing market."

Give us a  break, please. I don't mind a slump in the market, nor will I panic about a slump in the economy. But for goodness sake, decide which is the chicken and which is the egg. Stop dropping them both in the pot at random, making a tasteless stew.

Thanks for listening. Your comments?

Another Second Home Reason

One of the reasons I love my job is that there is no end to the discovery of new information about second homes. Recently I wrote about buying a second home in a college town, and gave all the good reasons to do so. But a recent news article forwarded to me by a colleague, pointed out that I missed one very hot set of buyers: College Football fanatics. Okay, they don't have to be fanatics, but certainly dedicated alumni at the least, and, fanatics at best. College football is a huge draw, and for many locations, finding a place to stay during the home games is next to impossible. Capitalizing on this, new condos are being built just for that purpose, and the fans are buying them up. And certainly, slump or no slump in the housing market, there will no end to the devotion of the football fans. Yet another proof that the second home market will remain a really good thing for everyone. (And in case you are wondering which college towns are in for football, check out Tallahasse, Florida; Athens, Georgia and Louisville, Kentucy, for starters. Now, let's see how well the teams do! )

Vacation Home Blues

I really didn't want to write any more about the housing numbers, even if the 30% drop in sales in my own state, California, was the biggest dip in sales volume since 1982.  And I didn't want to write any more about the housing decline and its positive effect on the stock market, as investors move more money into equities. And I really didn't want to write any more about the housing market continuing to dip for a little bit longer. So, I won't.

At the risk of emulating my childhood hero from Mad magazine, saying "What, Me Worry?" I do feel that someone, and it might as well be me, continues to point out why we have a vacation home market. In very practical terms, if you have a family that takes frequent vacations, owning a vacation home is just good sense (cents.) Hotel costs are not the only reason, though they are a really big one. There's also the creating of family traditions, there's the ability to come and go when you want, high season or low, and there's the ease of inviting friends, relatives, kid's friends, at a moment's notice.  Vacation homes are part of the American dream, almost as much as owning a first home. Whether it's a little cottage at Lake Tahoe, a condo for the winter in Florida, or that cozy trailer on the lake in New Hampshire, I personally feel we are not about to change our vacation habits. So, I have the 'vacation home blues' as all the news is about what the market is not doing, instead of what we are all still enjoying and doing very well. Anyone want to cheer me up? Just send your experiences of having a vacation home, and confirm that indeed, you are not about to dump it now. Thanks.

Guess Who Else Buys Second Homes

I love second home news that makes me laugh. This item from Texas got an out-loud chuckle. Guess who needs to buy a second home? The members of the Texas legislature, it seems. Apparently, the number of days they need to spend in Austin exceeds the original (1800's) idea of a part-time citizen legislature. So many of them rent or buy second homes in Austin in order to be able to serve.

However, the part that made me laugh was this: it turns out that according to the Texas campaign spending laws, the legislators are allowed to use campaign money to pay rent to their spouse to cover their Austin housing, as long as the spouse holds the title separately. Well, that made me smile, especially when the article pointed out the number of current legislators who actually pay rent to themselves, as they  hold title on the property. Hmm. Seems to me there's a good second home market to be had here in Austin, now that the cat's out of the bag. On the other hand, since these guys only make $7,000 plus a year for their service, plus per diem, they might not be able to afford too much, so don't buy something too big.

Wise Investing

In the second home market, it's always helpful to have a second reason for buying a property, in addition to the investment. For some, it's to have a vacation place. And for others, as a recent Tom Kelly article on Inman points out, it might be to house your college-age kid off-campus. Tom has some great tips in the article, and points out that when the kids move on, you can get rid of the house/condo and get something you really want to retire in.

While I agree with everything Tom says, I'd add one point: Know when to get out. My friend got a townhouse for her son's school years, and as he moved on, she kept it as a rental. However, what she didn't watch closely enough were the property values. In many college areas, there is often an influx of newer developments, because housing is always in short supply. By the time she was ready to sell, (tired of dealing with the undergrad turnover), not only had the market dropped in general, but, there were so many new houses, her condo was just worth less. So she just about broke even.

So yes, college towns are great, and yes, like everything else, don't assume anything, especially not future prices! Thanks, Tom, for a great article. Read more:

Back to School: The latest in Retirement

Retire to a College Town

Lighthearted or Real Estate Blues?

Personally, I prefer a bit of lighthearted humor as we sit around mulling over the state of the real estate market. A Long Beach, California web report filled that need, as they reported on the rumors regarding the decline of realtors because of the slowed market. Accurately quoting Mark Twain, "The report of my death was an exaggeration," they point to a flurry of rumors about various real estate offices closing. Certainly one way to create a self-fulfilling prophecy of a dwindling market is to create more doom than is needed.

On the other hand, I did learn something new in this same report. Did you know that one out of every 75 Californians is a licensed real estate agent? Now that is worth blogging about. I find that a staggeringly high number. I thought everyone was a lawyer all this time. So there you go. No, real estate offices are not closing down rapidly, and yes, everyone (or at least one in 75 everyones) care about keeping this market from crashing down. That says to me, it will not sink like a rock. Your comments, please.

What Affects Real Estate?

Real estate professionals are often the best barometer for what is good for an entire community. As an example, take an area like West Sonoma County in California. The coastal area is a prime spot for second homes, with serene, pristine and protected rolling hills and coastal views. As a result, second home prices are at a premium. So when a stunning piece of coastal land is being sold to a gravel mining company, even real estate agents get concerned. As one of them mentioned to me, it's all about disclosure. You certainly have to let your clients know that the view of the hills they are about to buy, may disappear as the mining operation gets going. And then, what happens to the prices?

Of course, there is alway the phenomenom of 'not in my backyard.' But when an area is zoned for its scenic and biological value, allowing it to be dug up sure feels like a case of killing the goose that lays the golden eggs. For more information, visit Bay Hill.org

Half-Full, Half-Empty Home Buyers

It must be the old optimist/pessimist divide. How else do you explain that in the Florida market today, 42% think it's a good time to buy, 42% think it's a bad time to buy. According to a story run on Inman News, sales in Florida were down 24%, while prices were up 11%.  With mixed signals like that, no wonder homeowners there are having a hard time deciding if they should be optimistic or pessimistic. However, the optimists are still ahead, with 58% still thinking their home values will rise.

I guess when I read something like that, I sort of blink three times, scratch my head, and wonder, what's it really mean? Personally, if you are a homeowner and ready to sell, you'll sell, no matter what. If you are a buyer, and ready to buy, you'll buy. And if this isn't the time to make a move, no numbers will actually matter anyway. For example, if you have bought your home in Florida and are retired there now, does it matter if the price goes up or down? Personally, I don't think so. Maybe that's why there's a split...speculators versus those who have settled down. Anyway, I don't make up the news...I just share it, and muse on it. So there you have the latest from Florida.