"Hurry! These Rates Won't Last!"

Lack of Buyer Urgency

I was taking advantage of a welcome -- and too brief -- lull in my schedule the other day to cull the accumulated detritus on my desk (and on my office floor, and chairs, and . . .), and saw the following postcard: 'Hurry! These Rates Won't Last!"

The date?

October, 2009.

And therein lies the problem.

Broken Record

Home Buyers -- and presumably, mortgage borrowers -- have seen low rates for so long now that that's all they know.

All the postcards, phone calls, email's, etc. screaming that they'd "better act now" or risk losing out are simply falling on deaf ears (and blind eyes, in the case of emails).

Which leaves Buyers whose sense of urgency comes from within -- specifically, newly married, a new baby, an expiring lease, a job transfer, etc.

Call that "organic" housing demand, which is driving the housing market at the moment (along with "organic supply": downsizing, relocation, divorce, health issues, etc.).

Which, come to think of it, isn't so bad . . .

Dear Neighbor: 'about those Open House signs . . '

(That's) One Way to Cut Your Property Taxes

To: the anonymous neighbor(?) who toppled all my "Open House" signs the other morning
From: your friendly neighborhood Realtor (me)
Date: 7/30/2010
Re: my Open House signs

Dear Neighbor:

I'm sure you thought you thought you were striking a blow against obnoxious advertising the other morning when you toppled all my "Open House" signs and left them in a jumbled heap.

But what you really did was make it more difficult for my Realtor colleagues to find me at your neighbor's house last Tuesday, when I was there holding it open for Broker Tour (when Realtors check out all the new listings, from 11 a.m. to 1 p.m. each Tuesday).

Because the house is in a cul-de-sac and easy to miss, I set out several signs to provide directions.

I set out the signs at 10:55 a.m., and -- had you not toppled them -- would have retrieved them a little after 1 p.m.

With no signs to direct people, my traffic was low, and as a result of that your neighbor's house will take that much longer to sell, and likely fetch a correspondingly lower price (sales price invariably declines as a function of market time).

So, not only will you get to see more, not less, of me while I work hard to sell your neighbor's home over the coming weeks (months?), the value of you and your neighbors' homes will be pegged to whatever (lower) price I'm able to fetch for your neighbor's.

On the other hand, maybe you were just trying to reduce your property taxes??

Sincerely,

Your Neighbor's Realtor

"Realtor Duct Tape"

Or, Real Estate's "Swiss Army Knife"

What's the Realtor equivalent of duct tape -- the (seeming) solution to every household repair problem?

My personal candidate is a razor blade (single-sided -- very important).

In just the last week, I've used one to: open a painted-shut window; remove gunk stuck onto (otherwise) gorgeous hardwood floors; remove adhesive labels from brand new French doors; and cut off a snagged loop of carpeting from an entry rug (I didn't have a scissors).

I've never had the need, but my guess is that a razor blade plus a little ingenuity would also get your keys out of your locked car.

Edina Country Club Trivia

Where Are All the Garages??

Guess which of the following statements about the Country Club district in Edina are true:

A. Fruit trees may not be planted on the boulevards
B. Country Club is known for relatively small lots
C. Front-loading garages were originally prohibited (and are still rare).
D. Homes in Country Club cost more than $1 million.

Answers: all true except D.

While the majority of homes do sell for more than $1 million, there are now a few on the market for less than that.

Bonus question:

What was the putative reason for the small lots? (Developers always have an economic incentive to build more house on less land.)

So that residents would congregate at the country club to socialize, not in their backyards.

Thanks to Edina Realty's Andrew Olive for the above.

P.S.: if you are a non-Minnesotan reading this blog, Country Club is one of the Twin Cities' toniest neighborhoods, known for its gorgeous, immaculately kept Colonials, Tudors, and Federal-style homes (like the one pictured above). The historically designated district has about 540 homes in total.

As you may have already guessed, Edina is the Twin Cities suburb where Edina Realty originated . . . in 1955.

"A Tale of Two Pole Barns"

"Fat" and "Skinny" Comp's

Due to the lack of good Comp's -- an issue I've raised repeatedly on this blog -- both appraisers and Realtors find themselves digging for more info on the ones that they do have.

So, I've been fielding more calls than usual from appraisers who want to debrief me on the features, floor plan, updates (or not), etc. of a home I've just sold.

I'm sympathetic, and subscribe to the "you gotta give to get" ethic, so -- time permitting -- I try to be cooperative.

Bottom Line: Less Discretion

Which brings me to the conversation I had the other day with an appraiser working on a refinancing loan.

After giving him some details on the home he'd called about, we discussed his specialty: hobby farms in the west suburbs.

One of the typical outbuildings on a hobby farm is a pole barn, a barn that is constructed with support poles that serve as the underlying support structure for the outer walls and roof (impressed? I looked it up).

Suffice to say that there is a great deal of variety in their size, functionality -- and cost; in fact, according to the appraiser, an elaborate pole barn can easily be worth $25k or more than a simple one.

Nevertheless, spooked lenders now doing everything "by the book" have arbitrarily decided that the maximum adjustment for pole barns is $5k-$10k.

The result?

A hobby farm with a deluxe pole barn is less likely to appraise -- and therefore, sell.

"Flattering" Spam Posts

Attracting -- and Deleting -- Spam

"Imitation is the sincerest form of flattery."

Actually, when it comes to blogs and spam posts, it's the other way around: 'flattery is the sincerest form of imitation.'

By that, I mean that the usual m.o. of people posting b.s. responses on blogs to piggyback on their popularity -- and drive traffic to their own Web site and whatever they're hawking there -- is to open with an faux compliment.

So, I have now seen -- and deleted -- innumerable posts on this blog that start out, "loved your post on . . .," then close with the spammer's URL (http://www.buymycrap.com/ or some such).

I do try to delete these whenever I find them, but lately the pace seems to have picked up ("a high quality problem to have," as they say).

Hint of Mid-Century Modern

See It?

Mid-Century Modern: A design style that emerged in the mid 20th century characterized by clean, simple lines, whether geometric or organic. The movement embraced modern technology and focused on a very livable style.

--Aurora Antique Pavillion

My listing at 601 Drillane in Hopkins (pictured above) has been attracting attention from Buyers interested in Mid-Century Modern architecture.

The home, a California rambler built in 1953, has over 1,800 finished square feet on one level, and sits on a gorgeous, park-like .55 acre near Oakridge in Hopkins. It's listed -- by me! -- for $289k (it's been on the market two weeks).

See the influence?

If you'd like more info, or want to set up a private showing, please call me at 612-925-7701.

$700k Below Tax Value

Not $700k -- $700k Below Tax Assessed Value

Where: 1415 June Ave., South Tyrol Hills in Golden Valley

What: 4 BR/5BA home built in 2002 with almost 5,400 finished square feet.

How much: $799,900 asking price; tax assessed value: $1.504M

When: originally listed for $1.679 million in March, 2009

Who: Listed with RE/MAX Results

Well, 1415 June Ave. (pictured above) certainly looks like a deal.

So what's the story?

I haven't been in, so that's a big caveat.

However, the combination of lender approval (it's a short sale), needed repairs, and a hefty tax bill (almost $24k annually, but certain to come down) aren't helping.

Still, I'm not aware of a home sporting a bigger discount from tax assessed value currently on the market in the Twin Cities.

"Perfect for . . . Neither" (What Does That Leave?)

Real Estate Typo's

"Perfect for owner-occupantnor investors" (sic)

--Excerpt from MLS-listed duplex

It's common for a duplex or other multi-family property listing to tout its appeal to either owner-occupants or investors.

It's much less common to see one that says it's appropriate for . . . neither.

P.S.: And this from today's Star Tribune, which didn't use to have typos or grammatical errors (let alone two in one sentence) -- and did have proof checkers: 'Fisher said the real estate of the market will be revealed as the effects of the tax credit wears off.'

That would be, "the real state of the market," and, "effects wear off . . ."

How Much Showing Activity?

One Way to Tell

It's a moot point if your (Buyer) client doesn't like the home, but if they do, and certainly if they're mulling an offer, one of the more important pieces of information to glean is, "how much showing activity has there been?"

That's relevant because it tells you how much (if any) competing interest there is.

Mix that in with a thorough analysis of the Comp's, the nearby Actives, and, of course, how much your client likes the home, and you start to have an idea what a good offering price should be.

All of that came to mind yesterday as I wrestled with the front key stuck in the deadbolt of the home I had just finished showing (it wouldn't budge, so I left it there and called the listing broker to alert them).

Assuming it wasn't just me but a truly sticky deadbolt, the answer to the aforementioned question would be, "not much."

Minneapolis' Hottest Job?

Versus, Say, Coolest

What is Minneapolis' hottest job?

It's not restaurateur, Internet app designer, or hospitalist (all hot categories, by the way).

No, at least today, the hottest job in Minneapolis -- literally -- would belong to the trio of masons I saw repairing the brick facade of the Dunn Bros. coffee shop at 34th and Hennepin.

(Although I didn't see any, no doubt there are also at least a few roofing crews at work in today's tropical heat.)

The RE Biz & "Inferior Goods"

McDonald's, iTunes --
and Real Estate Signs

In economics, the term "inferior goods" means anything that you consume more of as you have less money.

Historically, foods like hamburger (vs. steak), potato's, rice and the like qualified; today, that would be fast-food chains like McDonald's, and all the Dollar store chains that appear to be doing brisk business.

"Inferior goods" applies to other things, too.

So, demand for entertainment is also surprisingly recession-resistant.

That's because people tend go to the movies more, not less, even as they cut back on luxury goods and services.

Or perhaps makes that "download more, not fewer, iTunes."

Real Estate Equivalent

In the real estate business, the equivalent would be good, 'ol-fashioned real estate signage.

Even as Realtors pare back expensive media advertising (how do you think Google makes its billions?), they are stepping up -- or at least maintaining -- their purchases of "For Sale" signs, sign riders, banners and other hallmarks of boots-on-the-ground marketing.

At least, that's the take I got this am from the sign company I've done business with for years.

"MSF" & Weekend Open Traffic

Real Estate Dominoes

I held four(!) broker opens this weekend, ranging in price from Golden Valley ($299.9k) to Cedar Lake in Minneapolis ($875k).

Of the serious Buyers who came through -- perhaps 25% -- all were "MSF" ("Must Sell First").

"How Long Will My House Take to Sell?"

The Second Most Popular Question in Real Estate

What's the second most popular question in real estate? (the first being, "what's my home worth?")

"How long will it take to sell my home?"

Unless the Realtor is going to buy it, the honest answer is, "I don't know."

However, it is possible to give the owner an estimated range, based on the following four, inter-connected variables:

One. Price.

The higher, the longer.

Locally, for example, there is currently a two year supply of $1 million-plus homes for sale in Edina.

If you are contemplating selling one . . . that's how long you can expect to be on the market.

By contrast, smaller, more affordable homes in popular Twin Cities neighborhoods like Linden Hills and Fern Hill take an average of 3-4 months to sell now.

Lately, homes under $250k or so in particular tend to sell fastest because they appeal to first-time home Buyers, who by definition don't have to sell another home in order to buy.

Two. Condition and updating needs.

As I've blogged previously, homes that require major updating (over $100k) have been tough sells in today's market because Buyers have to have that money in reserve.

Cheap mortgages -- and they're now well under 5% -- don't make it any cheaper, or easier, to tackle a major remodel.

Three. Relative Value.

Homes that are well-priced, staged, and marketed relative to their peers sell faster.

Always have, always will.

Four. Broad or narrow appeal, or, "the quirky factor."

Yes, it's true that "all real estate is unique" -- but some real estate is more unique than others.

It's also the case that there's "good unique" and "bad unique."

So, views of the Minneapolis skyline from the west side of Lake Calhoun would be an example of the former.

A home with an odd floor plan and a hodgepodge of architectural styles, the latter.

The common denominator in all four of the above variables is, how broad or narrow is the potential pool of Buyers for the home in question?

As a general rule, the broader and deeper the pool of prospective Buyers . . . the shorter the market time.

Most Important Question on Seller's Disclosure?

Sellers Who Don't Know the Condition of their Homes

What's the most important question on the Seller's Disclosure? (in Minnesota, a 9 page, single-spaced document with perhaps over 100 of them)

At least in my opinion, the one asking whether the owner has continuously lived in the home the last 12 months.

That's because the answer to that colors all the other answers.

Legal Standard

Critically, the responses on the form are to the best of the owner's knowledge; if they've spent 9 of the last 12 months at their Sun Belt condo, they may not know that the roof has sprung a leak, there was water in the basement after a particularly heavy rain, or that the fridge's compressor is suspect.

Of course, a good Buyer's inspection should reveal all those things.

But if they don't, and the Buyer is adamant that the Seller's disclosure was deficient, the legal standard for recovery is proving that the owner knew or should have known about the problem.

Exhibit A in the owner's defense to any arbitration action or lawsuit is likely to be the line in the Seller's disclosure indicating that the owner hasn't continuously occupied the home the last 12 months.

P.S.: Of course, an owner who's truly unaware of the condition of the property -- say, because they've rented it for several years -- is better advised to tell Buyers that, and either sell "as is," or pay for a third party inspection.

Lake Harriet Art Car Parade

Highlights of the 2010 Lake Harriet ArtCar Parade

Highlight #1: the couch that turned out to be motorized (and served as the parade's pacesetter, er, vehicle).

Highlight #2 (more like relief): finding out that the oblong shape covered with a white sheet with dancing people inside was supposed to be a zeppelin -- vs., say, something that would have been awkward to explain to my three young (and puzzled) children.

P.S.: if you can't read backwards, the vehicle pictured above (from a previous year's parade) is named "cork truck."

"Would Your Client Consider a CD?"

Low Rates . . If You Qualify

Last year, I heard that question from would-be Buyers maybe 3 times.

This year, I've logged that question three times . . . just this week!

And that, with mortgage rates plumbing all-time lows: just above 4.5% to those with impeccable credit.

Which, of course, is the catch.

Few Sellers Biting (So Far)

Buyers float seller financing, like a contract for deed, precisely because they can't qualify for a mortgage.

Their credit scores may be too low (or non-existent); they may have filed for bankruptcy recently; or they may not have any money for a downpayment.

Unfortunately, all those yellow flags are problems for home sellers, too -- especially the one about limited funds for a down payment.

That's because the risk to the Seller who accepts a Contract for Deed is that the Buyer doesn't perform, and the Seller gets back a property that's much the worse for wear.

On top of that, most Sellers are selling because they need the cash, in one lump sum -- not in monthly payments stretched out over years.

Blog Milestones

50,000 Page Views -- and Counting!

Sometime earlier this month, the City Lakes Real Estate blog officially tripped 50,000 cumulative page views.

And to think, I only account for perhaps 3,000 of those (in the course of editing and formatting posts, I do log in multiple times a day -- and just occasionally to see what posts are getting read).

"An El Station Plus Retail"

Development Formula

There are more than 80 distinct Chicago neighborhoods, and dozens of unofficial ones. All [of them] pretty much feature an El station surrounded by retail.

--Chicago resident and tour guide Evelyn Thompson, quoted in A Fresh Take on Chicago"; The Star Tribune (7/25/2010)

Exactly.

Time to get those light rail stations up and running locally!

P.S.: it sure would be nice to quote the local paper more often. This is probably the first time I've mentioned something from the Star Tribune on this blog in, oh . . . ever.

(The Virtue of) "Down-Selling" in an "Up-Selling" World

"Would you like fries -- and a cherry pie, and a latte, and a DVD, and a ??? -- with that?"

I think it's fair to say that we live in an "up-selling" world.

There's never just one membership category anymore; there's "standard," "deluxe," and "premiere" (that applies to everything from credit cards to health club memberships).

If you've bought anything electronic in the last decade, you doubtless know the "extended warranty" pitch by heart (don't, they're a huge profit maker).

Even non-profits and charities have embraced this marketing principle; how many times have you been told that, "for just a few dollars more per month, you can vault from a "supporting" member (or some such) to a "sustaining" member?

Opting Out

Who wouldn't go for that?

Me, for one.

I try to resist impulse buying whenever I can, and know that a lot of these come-on's pad companies' bottom lines.

So when it comes to selling real estate, I don't do that to my clients, either.

I find that there are two benefits to that:

One. Clients like it when I save them money (who wouldn't?).

Two. When I actually do recommend that my client spend money on something -- like swapping out the orange shag carpeting for something more neutral and updated . . . they tend to listen to me.

What's that line: 'neutral carpeting, $700; client trust . . . priceless?'

Home Pricing: 'the Tilt Factor'

Pinball Wizard . . . or Dunce?

The analogy is lost on anyone under 30 -- too many electronic video games -- but I like to invoke something called "the Tilt Factor" in pricing my clients' homes.

By that, I mean that it's fine to be aggressive, and pick a price at the high range of what the "Comp's" suggest is fair market value.

In pinball parlance, that's equivalent to jiggling the machine to get the pinball to move a scooch to the left or right.

However, if you overshoot that range -- i.e., shake the pinball machine too aggressively -- you "tilt," and the game's over.

The same's true in real estate . . .

Michael Lewis' The Big Short: Diabolical Castles in the Sky

Voiding Credit Default Swaps

In a book stuffed with scathing insights and blockbuster revelations, here's perhaps the biggest one (courtesy of Michael Lewis, writing in The Big Short):

The reason Citigroup (amongst others) is considered "Too Big Too Fail" isn't because it holds over $1 trillion in ordinary Americans' savings in their vaults.

It's not because inflicting billions of dollars of losses on Citigroup's creditors and shareholders would jeopardize other financial institutions -- and by extension, the U.S. financial system and economy (domestic and global).

And it's not even because the U.S. would then have to step up and make good on its guaranties of hundreds of billions of Citigroup's crappy mortgages and other collateral.

The Real Reason Citigroup is TBTF

No, the real reason that Citigroup is considered to be TBTF is that it may be the object of billions -- maybe trillions -- in Wall Street bets, just like the housing market was before:

Citigroup's failure . . . would trigger the payoff of a massive bet of unknown dimensions: from people who had sold credit default swaps on it to those who had bought them. This is yet another consequence of turning Wall Street partnerships into public corporations: It turns them into objects of speculation. It [is] no longer the social and economic relevance of a bank that renders it too big too fail, but the number of side bets that have been made upon it.

--Michael Lewis, The Big Short (p. 263)

What to Do

If Lewis is right -- and I have no reason to think he isn't -- the appropriate policy response couldn't be more obvious, or necessary.

Step One: the federal government should void all such credit default swaps, immediately.

Aren't those private contracts?

So what?

So were millions of contracts (presumably unwritten) making human beings owners of other human beings.

What do you think happened to all those contracts on January 2, 1863? (the day after The Emancipation Proclamation).

Step Two. Break up the monster banks that ushered in this toxic, dysfunctional and highly combustible state of affairs (cue Warren Buffett's line about "financial weapons of mass destruction").

Step Three. Hold their leaders accountable for their epic greed, negligence and corruption* (vs. giving them, collectively, ongoing billions in bonuses).

No, that hasn't happened yet.

In fact, it hasn't even started.

*Let the courts figure out the proper weighting; mine would be 50% greed, 30% corruption, 20% negligence.

Reason for Tougher Negotations

"What's That House Cost?" -- Vol. #42

Want to buy 100 shares of Microsoft?

If the last trade was for $25.43, it's a good bet that you'll have to pay . . . .$25.43 (or maybe $25.42 or $25.44).

Want to buy a nicely updated, four Bedroom Colonial in East Edina?

That'll be . . . . $950,000. Or maybe $875,000. Or perhaps a cool $1 million.

For the same house.

Defining "Market Value"

Why such a broad range?

Because there haven't been that many recent deals to serve as benchmarks (called "Comp's," or Comparable Sold Properties," as they're known in the trade).

With fewer transactions to serve as precedents, Buyers and Sellers have more ground to bridge to reach what everyone agrees is "market value."

"Locally Owned" BP Station

"I Didn't Do It!"

I guess if I owned a BP gas station, I'd do the same thing: buy a big banner reading "Locally Owned," and display it -- prominently -- in front of my gas station.

Which is exactly what I saw in front of the BP station on Excelsior Blvd. in St. Louis Park the other day.

Reminds me a bit of what post-Watergate Republicans did in Minnesota to distance themselves from Nixon: changed their name to "Independent-Republicans."

I think that lasted for about a decade, until Ronald Reagan made it OK just to be a "regular" Republican again . . .

(More) Goings On About Town

"It's Bird, It's a Plane, It's a . . . "

. . . "Nice Ride Minnesota" bike sharing station!

A block from The Birchwood Cafe in Minneapolis' Seward neighborhood, I coudn't figure out what I was looking at.

It didn't look like a new bus stop -- too big.

And it didn't look like a new bus shelter (what was it doing in the street??).

"It" turned out to be a sleek bike rack stocked with shiny, new (lime!) green bikes -- part of the Twin Cities' "Nice Ride Minnesota" new bike sharing program.

Less than 5 minutes later, I ran into a second location -- outside the (terrific) Seward Co-op.

It turns out that there are 60(!) such stations, already installed or scheduled to be.

Take that, Portland!

P.S.: And no, the bikes aren't available year-round. In a concession to our, umm, "challenging" climate, the bikes are out of commission from November until April.

"First Rock From the Sun"

My Own "Emily Litella" Moment

"First Rock From the Sun" --that's what the tiny headline, at the bottom of The New York Times science section, read the other day.

"Holy $#%@!," I thought.

I didn't know we had a space probe studying the Sun.

And if we did, and it brought something back, why is it such a tiny headline?

And how is that even possible, given that the sun is made up of superheated gases, not rocks?? (or so my 8th grade science teacher always said).

The explanation, it turns out, is that the headline is a play on the old TV show "Third Rock from the Sun."

The "first rock from the Sun" would be Mercury, and the story was referring to new photos of its surface taken by a NASA probe.

As Emily Litella always used to say, "Never mind . . . ."

What's Up With Uptown?

Busy Thursday Night

What's up with Uptown?

A lot, it turns out.

Last night, I wandered around the newly redesigned Calhoun Square (BIG improvement) while noshing on all the free food vendors were giving out; went across the street for some great Thai food (not free); and heard a new hip-hop group, called "No Bird Sing."

Not "went to see"-- rather, "heard," as in, "they were so loud I literally couldn't avoid hearing them as I walked by." (that seemed to be a minority take, though).

What's that, you didn't realize Uptown had a new music venue?

No Bird Sing was playing at the new Apple store on Hennepin -- one of the coolest retail stores I've ever been in, anywhere (skylights, 30' (?) ceilings, electronic wall displays -- and of course, throngs of people).

425 Idaho Ave. North in Golden Valley

New Lions Park Listing

Where: 425 Idaho Ave. North, Golden Valley (Hopkins schools)

When: new on the market this morning! First open this Saturday, 1-3 p.m.

What: Well-appointed 3 BR/3 Bath Split-Level with 2,100 FSF on .35 acre

Who: listed by Ross Kaplan, Edina Realty City Lakes (broker)

Please stop by my open house this Saturday from 1 p.m. to 3 p.m. at 425 Idaho in Golden Valley (just west of Highway 55 and 100).

This nicely updated Split-Entry features beautiful hardwood floors; a vaulted Master Bedroom with 3/4 Bath; and a spacious lower level great for kids -- or a home office.

Great setting and location, too: a gorgeous, .35 acre lot in in private Windor Woods. Walking distance to Lion Park and Golden Valley Commons; minutes to downtown Minneapolis, Uptown, and the city lakes.

Proposal: A U.S. "Dividend Holiday"

Tapping Corporate America's Cash Hoard to Reward Investors & Stimulate the Economy

Money is like manure; it's not worth a thing unless it's spread around.

--Thornton Wilder

Let's see if I've got this right . . .

The economy is decelerating now because the federal stimulus to date has run its course, and additional federal stimulus risks drowning the U.S. (further) in red ink and endangering its very creditworthiness.

Meanwhile, corporations sit on the mother lode of all cash hoards -- an estimated $2 trillion for just the S&P 500.

All this, as shareholders have just suffered the worst decade investors have experienced . . ever: nominally down 20% from where they were . . . in 2000.

And that's before accounting for the stock market's sickening volatility, or a decade's worth of inflation that masks even more erosion in investors' wealth (my label for the foregoing toxic brew: 'risk without return').

Three Birds With One Stone

So, to summarize:

The challenge now is to get money into the hands of deserving people -- who will actually put it to good use -- without making future generations pay for it.

Anyone else have a light bulb go off?

Here's mine:

Give corporations an incentive to disburse their cash hoard; then, give shareholders an incentive to spend it.

The simplest way to do that would be to declare a Dividend Holiday through the end of 2010 during which the federal government would waive taxes on all dividends.

Carrot won't work?

Then consider a stick: taxing corporations on excess undistributed cash.

Either way, such a bold step would have three benefits (and few costs):

One. It rewards long-suffering shareholders.

Why is that important?

Abuse shareholders long enough, and eventually they will "take their marbles and go home."

After the 1929 crash, an entire generation learned not to put their money in stocks.

That attitude threatens capital formation, future innovation, and arguably capitalism itself.

Deprive savers of a return on their investment, and they lose their wherewithal to finance their retirements.

Guess where they'll turn to for help.

Two. It takes the money away from overpaid CEO's.

Incredibly, the average S&P 500 CEO now makes almost $10 million annually, up 700% since 1980.

Meanwhile, workers' wages during that time have stagnated, and investors -- to belabor the point --are worse off than they were a decade ago.

As the saying goes, money -- like manure -- isn't worth anything until it's spread around.

Three. It relieves the pressure on the Federal Reserve to print more money, and the U.S. Treasury to borrow more.

According to that famous physics theorem, the First Law on Holes, "when you're in one . . . stop digging!!"

Having dropped interest rates to zero and kept them there, Ben Bernanke is now resorting to raw injections of liquidity (called "quantitative easing") to stimulate the economy.

Enough!

There's plenty of money in the economy already.

The challenge is to get it circulating, productively, again.

Fewer Purchase Agreements, More Leases

Mastering the Rental Market

Want to know which way the (real estate) wind is blowing?

Here's what's on the agenda for this year's Minnesota Association of Realtors forms course:

New this year are lease contracts, exclusive representation for consumers looking to rent, and lease listing forms.

Detect a theme?

In a market with more rental activity and fewer Buyers . . . more Realtors are getting up to speed helping clients find rentals (I seem to recall something about lemons and lemonade . . )

Too Much of a Good Thing?

When Less is More

Guess how many Bedrooms and Bathrooms there are in this 3,000 square foot Fern Hill home:

A. 3 BR/2 BA

B. 4 BR/2 BA

C. 4 BR/3 BA

D. 6 BR/5 BA

Answer: D

I haven't been inside, so I can't say for sure.

But you'd certainly guess that a home this size with so many bedrooms and baths feels cramped, if not claustrophobic.

Taking a home from 2 Bedrooms to 3 certainly adds value.

You could even argue that going from 3 Bedrooms to 4 does, too.

However, somewhere between that 4th and 6th(!) Bedroom -- especially in a medium-sized home -- the law of diminishing returns kicks in . . . or begins to operate in reverse!

P.S.: One possible explanation? The home's owned by a contractor -- who didn't know when to call it quits.

Jeremy Grantham on "the 'Flation Issue"

As Flummoxed as Everyone Else

What we are seeing now is a tussle between the 50% sustained speculation branch and the branch where two or three things go wrong and crack confidence. This struggle is an unusual one, and has created market effects I have never seen before, and you have not either.

--Jeremy Grantham, GMO Q2 2010 Newsletter

Somewhere [in the last 30 years], without any formal announcement of the change, the “client” in a trade mutated into a “counterparty” who could be exploited.

--Jeremy Grantham, GMO Q2 2010 Newsletter

Today is "Jeremy Grantham day" on the financial blogosphere.

That's because the influential investor just released his most recent quarterly newsletter.

For once, I didn't glean anything new or groundbreaking; the main highlight making the rounds is that Grantham has officially come down on the "deflation" side of the 'flation issue, at least in the short run.

The other sign that Grantham is flummoxed by today's uncharted financial waters: his three "weighted probability" scenarios, in which the chance of a big "up" move is put as just about the same as a big "down" move.

He might as well have just shrugged his shoulders.

Realtor Whistle-Blower . . . or Tattle Tale?

Pushing the Boundaries -- Literally

What do you do when you see another Realtor break the rules (or appear to)?

And if you do something, does that make you a whistle blower -- or a tattle tale?

Thankfully, the issue doesn't come up that often. But it does come up.

Here are the three most common situations where rule-breaking arises:

One. A home sells with virtually no market exposure, at a giveaway price -- and here's the kicker -- the Buyer's agent is the same as the home owner's (called "single agent dual agency" -- see, "That Sure Went Fast! (Too Fast??)".

Two. The Realtor "borrows" the MLS area number from an adjoining, more upscale part of town.

So, instead of entering the code that includes Powderhorn Park, the listing agent codes the listing for Kingfield, on the other (west) side of 35W.

Three. The listing agent flagrantly overstates a home's finished square feet (funny, the opposite never seems to happen).

"Tattling" or "Keeping it Honest?"

So, to repeat, what do you do?

My answer depends on a couple factors: do I have a client interested in -- or competing with -- the home in question?

Is the agent with Edina Realty?

If it is, I know who to call (their office manager -- or mine). And it matters more, because bad behavior by another Edina agent reflects on me personally.

Could there be a benign explanation?

For example, maybe the agent who was on both sides of the "fire sale" had express permission from their client to sell it, fast, at the best price they could get (but usually you do that loudly, not quietly -- otherwise how do you know it's the best price??).

And last but not least: how busy am I at the moment?

In general, I don't view it as my role to police other Realtors' behavior or business practices.

However, when such behavior harms my or my clients' interests, I see it as my obligation to do something.

As Martha Stewart would put it, "that a good thing."

P.S.: I suppose that the contrary argument would be that sleazy Realtors make ethical ones look good by comparison -- and therefore actually help the latter.

"Cambria Style" Magazine

The (Pen)ultimate in Product Placement

Let me be the first one to recognize -- and applaud -- innovative marketing ("The Brilliance of Redbox").

I'm just not sure that "Cambria Style" qualifies.

In essence, the magazine, put out by the makers of the counter top material, flips the usual ratio of proprietary content to commercial advertising -- call it 80%/20% -- to 20% proprietary content, and a very top-heavy 80% advertising/product placement.

And the 20% content ain't so hot.

So, readers are treated to glimpses of Mariel Hemingway's home and lifestyle -- and how both are enriched by cambria.

"Pergo Panache"

Sorry, I just don't buy it.

I found the article -- or what little of it I read --boring.

Plus, I just don't get the building material-as-magazine subject premise.

What's next, "Pergo Panache?" "Formica Flair?" (er, laminate)

P.S.: On other hand, whoever thought that day-time TV would ever be sponsored by detergent makers? (hence the name "soap opera")

Fewer Warm-Fuzzy Closings?

Uptick in Pre-Signings

Historically, the closing was when Buyers and Sellers put aside any hard feelings from their long-concluded sales negotiation, and wished each other well (and the Seller explained to the Buyer how that tricky basement light switch worked, amongst other things).

Is that tradition a casualty of today's more contentious housing market?

The uptick in pre-signings -- confirmed by several closers I work with -- could certainly be evidence of that.

Multiple Explanations

Buyers and Sellers pre-sign -- and therefore skip the closing -- for all kinds of reasons: conflicting business appointments; long-planned vacations; day care issues; medical problems, etc.

Another big reason that many Sellers in particular pre-sign is that they have already moved out of state — no doubt because their houses are taking longer to sell.

However, anecdotally, most active Realtors can report at least one or two closings recently where one (or both) of the parties absented themselves because of residual bad blood.

Closings and Closure

Which is too bad, in my opinion.

That's because it's preferable for Sellers who are moving on, to really move on.

Meanwhile, it's always nice to see incoming Buyers feel good about the home that they're about to occupy, hopefully, for years to come, and to receive their Sellers' good wishes.

Fortunately, the vast majority of closings are still like that.

How Much is a Blue Sky Worth?

"One Blue Sky, Hold the Clouds"

A cynic is a man who knows the price of everything but the value of nothing.

--Oscar Wilde

How much is a beautiful sunset worth?

"Priceless," at least according to a certain, ubiquitous ad campaign.

Not so a blue sky.

My photographer will digitally create a blue sky -- instead of today's overcast one -- for $20 (digital clouds cost extra).

I told her to go ahead . . .

First Open Near Oakridge 1- 3 p.m. Today

Where I'm Spending Sunday Afternoon

Where: 601 Drillane Rd (just west of 169, between Minnetonka Blvd. and Highway 7) in Hopkins
What: 4 BR/2BA "California Rambler" with over 1,800 FSF on one level -- all on a gorgeous .55 acre lot
How much: $289,900
When: new on market!

Please join me in the stunning, 3-Season porch of my new listing at 601 Drillane Road in Hopkins.

I'll have homemade lemonade with!

The rest of the home is available for viewing, too. :)

Real Estate & Acupuncture Parallels

Knowledge + Technique

My knowledge of acupuncture is limited to a couple sessions I had with a local practitioner years ago, for headaches.

But at least to my layman's mind, the gist of it seems to be an advanced understanding of the body's nervous system -- specifically, acupressure points -- combined with superb technique.

Doing real estate well requires a somewhat analogous combination of knowledge plus technique.

Pressure Points

The essence of any successful real estate marketing campaign comes down to identifying -- then properly showcasing -- each property's unique strengths, while simultaneously minimizing or defusing its negatives.

So, as I explained to a recent client, four large bedrooms on one level was very definitely a selling point -- which is why I emphasized it in the marketing literature (that floor plan can be hard to find, and many families seek it out).

Ditto for the home's unique architecture, sun room, and terrific lot.

On the other hand, the home's total of two bathrooms -- which I omitted to mention -- weren't a selling point.

Cost-Benefit Analysis on Wall Street

Goldman Sachs Settles with the SEC

Here's an ethical (and business) dilemma:

Would you steal $200,000 if you knew that, if you were caught, the only penalty you faced would be a $5,500 fine?

Do the following moral/financial calculation(s) with me.

Keep 97% of what you stole.

Face no jail time, don't admit guilt, and continue doing business as usual.

Hmm . . . tough choice -- especially for someone on Wall Street.

Business as Usual -- Still

Add five (!) zeroes . . . and the above is a fair summary of what just transpired in Goldman Sachs' $550 million settlement with the SEC (for the math-challenged, $20 billion is just what Goldman Sachs made last year -- more than enough to cover the SEC's $550 million fine).

And people are now hailing the SEC as "newly aggressive," "a re-energized watchdog," etc.???

Yeah, right.

P.S.: Guess whether Goldman Sachs' stock went up or down after the foregoing was announced.

Topping the Charts . . . In India??!!

Worldwide Blog Rankings

This blog's worldwide ranking, at least according to Technorati, continues to be about 19,000 (given that there are at least 5 million ranked blogs, that translates into the 99.7% percentile!).

While I can't prove it, I'm convinced that this blog's ranking in India is much higher.

That's because City Lakes Real Estate blog gets more than 1,000 page hits a month from servers based in India -- typically between midnight and 8 a.m. Central Standard Time (business hours on the other side of the globe).

For the most part, I'm delighted by that.

However, I can't get rid of this gnawing feeling that there's a real estate blog somewhere in India with an awful lot of familiar material -- minus my name and URL.

Hope I'm wrong about that . . .

No, Not THAT QE II!!

First, the Trial Balloons

What is all this fuss I hear about the Supreme Court decision on a "deaf" penalty? It's terrible! Deaf people have enough problems as it is!

--Befuddled spinster Emily Litella, one of Gilda Radner's several characters on the original Saturday Night Live.

Emily Litella comes to mind as the murmuring about QE II is getting louder.

No, not that QE II (pictured above).

Rather, they're talking about another round of quantitative easing by The Federal Reserve.

Because the Fed has already lowered interest rates to zero, its remaining weapon to stimulate an apparently flagging economy is to simply print more money (the fancy name for this is "quantitative easing").

In practice, that's accomplished by buying up new U. S. debt -- debt which the government has been more than happy to issue lately.

First broached on the blogosphere perhaps a month ago, the drumbeat in the MSM (main stream media) is growing discernibly louder the last 10 days or so.

P.S.: Growing up in the Twin Cities, I was confused by why everyone was making such a commotion over the West Bank. By age 8 or so, I finally figured out they were referring to the one in the Middle East.

I thought they were referring to the one across the Mississippi from the East Bank of the University of Minnesota.

Why Do Sellers Misprice?

Lack of Information & Objectivity

Not all Home Sellers misprice -- or would if their Realtor didn't convince them not to -- but enough do that it begs the question: why?

From my perspective, it's usually a combination of three factors (none of which involve vanity or ego).

One. Lack of information (about the Comp's, or comparable sold properties).

A client of mine last year was adamant that his home was worth more than another on his block that had sold for $40,000 more than I recommended pricing his at.

So I asked him, "Did you see your neighbor's updated Kitchen? The new master bathroom? All the new windows in the back of the house?

Answers: 'no,' 'no,' and 'no' -- he'd never been inside. (Memo to fans of Trulia, Zillow, CyberHomes, etc.: they suffer from the same shortcomings.)

Two. Lack of objectivity.

This one especially comes up with homeowners who haven't moved in a long time.

Anything you look at day after day -- let alone year after year -- gradually becomes . . . invisible.

Once upon a time, when I lived in Manhattan, I had a 35th floor apartment with sweeping views of upper Broadway and the Hudson (at least until a developer put up a new, 50 story building across the street).

Yet after a few months, the only time I really noticed it anymore was when guests would visit and be mesmerized by the view.

Or, after I'd been away for longer than a week and returned, the views once again registered for a few days, before turning back into wallpaper (albeit very attractive wallpaper).

The same phenomenon explains my initial meeting with a client a ways back, as we toured her home.

When we got to the master bedroom, I pointed out a conspicuous stain in the ceiling that I recommended fixing.

"What stain?" was her first, incredulous (and honest) response.

Then a second later: 'Oh, that stain . . .'

(Sidebar: the one exception to becoming inured to one's everyday environment: natural light. At least in my experience, you never get tired of natural light -- or used to its absence.)

Three. Lack of information -- about Buyer tastes, market trends, etc.

Another recent client of mine took umbrage at the (rather deafening) chorus of feedback all zeroing in on the home's dated feel.

The windows, the carpet, the Kitchen counter tops, the color scheme, the home's siding -- and on and on.

The owner had spent good money periodically updating those things and keeping them in good repair, but after 30 years in their home, they simply weren't able to relate to Buyers' comments.

Which leaves it to a Realtor they trust to (gently) tell them -- ideally, before they come on the market.

Raising the Roof on Dean Blvd.

From Rambler to . . . Rockin'

No, they didn't throw an over-the-top party the other night on Dean Blvd.

The owner literally raised the roof.

Instead of the dowdy 1955 rambler (pictured above) that sat there for more than half a century, there is now a sleek Contemporary -- atop the original home's huge (1,752 sq. ft), fortress-like foundation (I was impressed by how good the bones were when I showed it).

It also redeems the purchase price: $600k last summer, which I thought was high at the time.

Financial Reform and Straw Cattle (er, Men)

WSJ: 'Financial Reform Hurts Farmers'

"Finance Overhaul Casts Long Shadow on the Plains"

--Headline, The Wall Street Journal (7/14/2010)

So, according to The Wall Street Journal, regulating derivatives -- as the financial reform bill before Congress weakly proposes to do -- will in fact hurt Midwestern farmers.

That's because it will cost them more to hedge the sale of their crops, livestock, etc.

There are only two problems with that argument:

One. It's far from clear that regulating derivatives will make them more expensive.

In fact, buried in the Journal's own article are quotes from several experts who argue that better regulation and more transparent trading will make derivatives less expensive.

Two. The cost of not regulating derivatives (just so far) has come to trillions in new federal debt, a crashed financial system, and a nasty, ongoing recession.

Not exactly good for farmers -- or anyone else!

P.S.: my alternative -- and more correct -- headline: 'Finance Overhaul Lifts Long Shadow Over the Plains.'

Ross Kaplan Humidity Index

I walk around with a humidity gauge -- on the bridge of my nose.

Judging by how much of the day I've spent wiping off my glasses . . . today's is up there!

Lenders Now: Scrooge, Not Santa Claus

Checking "the List" -- Again & Again

He's making a list,
And checking it twice;
Gonna find out Who's naughty and nice.
Santa Claus is coming to town

--lyrics, "Santa Claus is Coming to Town"

These days, lenders also seem to be "checking their list" twice -- if not a whole lot more.

The result?

Deals that are getting finalized much later in the process -- sometimes, right before (or at) closing.

Or, renegotiated along the way, due to appraisal issues.

Getting Something Read Into the (Real Estate) Record

"Funny, I Didn't See Him at the Meeting"

Politico's know that a Congressman who never actually delivered a speech in the Senate or House chambers can nevertheless have their remarks "written into the record," or transcript, of that body's deliberations.

Real estate has something similar.

After each local real estate office holds its weekly Tuesday meeting, the Office Administrator ("OA") assembles and circulates a list of their office's Pre-List's, Price Reductions, Buyer Needs, etc.

Can't make the meeting (because you're prepping for Tuesday tour)?

Just email the OA.

No Spies from Finland, Singapore, or South Korea??

Imitation is (Still) the Sincerest Form of Flattery

Nice pep talk from Thomas L. Friedman in his column today:

Everything the Russians should want from us — the true source of our strength — doesn’t require a sleeper cell to penetrate. All it requires is a tourist guide to Washington, D.C., which you can buy for under $10. Most of it’s in the National Archives: the Bill of Rights, the Constitution and the Declaration of Independence. And the rest is in our culture and can be found everywhere from Silicon Valley to Route 128 near Boston. It is a commitment to individual freedom, free markets, rule of law, great research universities and a culture that celebrates immigrants and innovators.

--Thomas Friedman, "The Spies Who Loved Us" (The NY Times, 7/14/2010)

My only quibble: supposedly the world's most enlightened constitution was the former Soviet Union's, even as Stalin sent millions to die in gulags.

THAT Sure Went Fast (Too Fast??)

"Now You See it . . .
Now You Don't"

In a post last month, I posed the question, "Did the Seller Leave Money on the Table? Four Ways to Tell."

That post came to mind as I scanned the particulars of 2900 Chowen Ave. South, which came on MLS this afternoon -- I'm not kidding -- as "Active" at 1:45 p.m.; was switched to "Pending" at 1:47 p.m.; then was switched from "Pending" to "Closed" at 1:49 p.m.

Total elapsed time?

Four minutes.

Sale Postmortem

Well, at least other Buyers (and their agents) had a "heads up" that 2900 Chowen was coming on the market, right?

Wrong.

I can only speak for myself -- but I live 2 blocks away, have sold over a dozen properties worth $6 million-plus within a mile, and have an extensive local network of contacts.

And I didn't hear a peep.

OK, so at least the Seller got a good price, right?

Draw your own conclusion, but the asking price was $200,000, and the selling price was $150,000. (As a percentage of market time, that just might be the world's biggest price reduction --ever.)

That compares with a tax assessed value for just the land of $196,700.

Oh . . . and a couple doors down, the lot at 2822 Chowen is now "Pending." List price: $285k -- for a lot that is 21% smaller than 2900 Chowen (6,050 square feet vs. 7,623).

Single Agent Dual Agency: Exhibit A

OK, well at least the Seller's agent negotiated hard for them, right?

Hard to say, because the Seller's agent . . . . was also the Buyer's agent.

Called "single agent dual agency," such deals are notorious for conflicts of interest.

If you're keeping track, that's 4-for-4 on my "four ways to tell" if the Seller left money on the table.

As I say . . . draw your own conclusions.

P.S.: So guess what 2900 Chowen is worth according to Zillow? (Called a "zestimate")

Give up?

Try, $406k.

"We Don't NEED to Sell"

Seller Motivation (and Lack Thereof)

Does "not needing to sell" make your house worth more?

At least some Sellers seem to think so.

Put it this way:

You seldom hear a Buyer, in the middle of a negotiation, say, "You know, we don't NEED to buy."

Yet Sellers, on the other side of the same negotiation, increasingly can be heard to say, "We don't NEED to sell."

Which begs the question: so why are you?

Real vs. Fake Leverage

What that statement is really about is perceived leverage.

If you don't really need to sell (at least the owners' thinking goes), you can hold out for a higher price.

Maybe so.

But that doesn't change the Comp's, which Realtors and appraisers alike use to establish value.

And therefore, that stance is not likely to raise the Seller's market value.

P.S.: By contrast, extreme Seller motivation can certainly lower it.

P.P.S.: As often as not, "not needing to sell" causes Sellers to set (and hold out for) for an unrealistic price, which leads to undue market time, which leads to . . . an artificially low price.

Real Estate's "Miranda Warning"

Why Buyers Shouldn't Talk Directly to Listing Agents

The person in custody must, prior to interrogation, be clearly informed that he or she has the right to remain silent, and that anything the person says will be used against that person in court.

--U.S. Supreme Court; Miranda v. Arizona decision (1966)

As a listing agent, I strongly discourage my selling clients from talking to the Buyer's agent, beyond exchanging social niceties.

In fact, direct contact between a represented client and the other side's agent is inappropriate; all communication is supposed to be between the two agents.

In practice, however, the Buyer's agent and Seller can cross paths when the former is previewing (looking at a home without their client), and the Seller is home.

"Hot Summer we're having" is certainly harmless enough.

"How many showings have you had, and what have people been saying?" isn't.

Seller Blunders

Perhaps the most damning -- and costly -- blunder I've heard of involved a Seller who let slip that their Contingency had been called, and that they'd lose their dream home unless they found a Buyer for theirs in the next 48 hours.

According to the agent who related the story, the Buyer's offer just dropped $20k.

Even if Sellers don't say anything compromising, sometimes, just their "body English" (facial expressions, general demeanor, etc.) betrays them. That's especially so if they're discouraged or impatient about how things are going.

Call it the real estate "Miranda Warning": anything you say (or telegraph) can and will be used against you.

Buyer Blunders

The same holds true for Buyers talking directly to Listing agents.

Case in point:

I recently met a Buyer, their agent, and the Buyer's contractor at a home I was listing to discuss repairs they were requesting of the Seller, including a wiring issue in the Kitchen.

Since the wiring was inaccessible and the Buyer insisted that the home required extensive remodeling (hence their low offer), I suggested it would be much cheaper to fix the wiring once the Kitchen walls were opened up.

At that point, the Buyer interjected, "Oh, no -- we love the Kitchen just the way it is!"

Oops.

Goodbye, negotiating leverage.

The Brilliance of Redbox

(Foot) Traffic Driver

If you've stepped foot in (or in front of) a Byerly's, McDonald's, or a zillion other retail outlets in the last two years or so, you've undoubtedly seen them: big, red kiosks with the name "Redbox" on them.

Each one is stocked with the most popular 100 or so DVD's, which rent for $1 a day.

In an age of online, instant everything, isn't that, well, kind of anachronistic?

Only until you realize -- after your 3rd trip to Byerly's in as many days -- that you seem to be setting foot in their store a lot more often.

And leaving with at least a couple items each time that you didn't know you needed (conveniently, the weekly coupon display is just steps from the Redbox kiosk :)

A/C Covered by Insurance? Better Double-Check

Home Warranties
& A/C Coverage

I don't do many "public service" announcements on this blog, but the following -- courtesy of the district manager for Edina Realty's home warranty vendor -- seemed especially topical:

It’s peak A/C season and we are getting lots of A/C home warranty claims - guess what the main reason for denial of coverage is? Lack of maintenance.

To keep your air conditioner maintained, on an annual basis you need to hose out the filter on the outside unit (gets rid of pollen and other build-up). If you don't the air flow decreases, causing strain on the system, which will eventually fail. Also make sure that shrubs are not overgrowing the unit.

Good advice . . .

Backyard (Life-and-Death) Drama

"Raffy's Got Something in His Mouth!"
"Raffy's Got Something in His Mouth!"

The first thing I noticed was my adolescent Golden Retriever, Raffy, proudly parading around our backyard with some unrecognizable object in his mouth.

The next thing I noticed were all the shrieking, squawking birds in the nearby trees.

(Actually, the very first thing I noticed was my two kids urgently summoning me, "Come quick! Come quick!").

In a few more seconds, I put two and two together: a baby robin had fallen out of its nest, and our boisterous, ever-curious pooch had scored his first, real kill.

Only not quite.

Once I got Raffy to release the unfortunate thing, it was quickly apparent that -- my kids' protestations aside -- there was very little to be done.

Breathing quickly and shallowly, it was a mess of feathers and mangled wings.

Nevertheless, both my kids implored me to call the Animal Humane Society, or the Avian Rescue group, or, or . . . . something!

What a nice sense of compassion, I thought to myself.

In another few seconds, the truly compassionate thing to do occurred to me.

I got a bucket from the garage, filled it up with water, and submerged the small, still suffering bird in it.