Housing Trends 2011

A Bigger Role for Home Warranties

No, this isn't a call about where housing prices are headed next year.

Rather, it's an observation that home warranties are becoming a bigger part of real estate sales.

Background

Local utility companies have offered home warranties for years now.

The basic plan typically covers the home's heating plant (forced air furnace or boiler), water heater, fridge and stove; premium coverage add the washer, a/c, dishwasher(s), etc., most often on an ala carte basis.

Such plans have also been a fixture of residential real estate transactions for at least five-plus years.

The most common situation: a home with older -- but still functioning -- mechanical's, where the owner wants to reassure a cash-tight Buyer, but also not bear the expense of preemptively purchasing several new appliances.

Instead, popping $400 or so for a home warranty has been a terrific compromise.

The appeal of such warranties has been further enhanced by the fact that payment is deferred until the home sells, when it is deducted from (buried in?) the home owner's sales proceeds; and the coverage can be assumed and renewed for subsequent years by the Buyer.

"Opting In"

As home warranties have grown in popularity, three developments have accompanied them.

One. Express mention of home warranties in the standard Minnesota purchase agreement.

So, there's now a clause, 2 years old, addressing whether or not the sale is accompanied by a home warranty, and if so, who's paying for it.

Two. More companies entering the business, and as a result, better pricing.

Locally, amongst utilities, Xcel Energy has been revving up to compete with Centerpoint Energy.

On the private contractor side, HSA, HMS, and several other companies write such policies.

"Leak" vs. "Roof" Coverage

Three. Home warranty policies are evolving and tightening up.

Until recently, private contractors offered a "deluxe" home warranty that, for an extra charge (natch), covered the home's roof and foundation.

However, such coverage was subject to both a deductible and a $2,000 ceiling, and required a private inspection.

Surprise, surprise, those limitations and caveats weren't exactly trumpeted in bold print.

To avoid misunderstandings (and lawsuits), both HSA and HMS now explicitly bill this feature as "leak coverage."

P.S.: And no, slapping a home warranty on a dilapidated home with shot mechanical's isn't a way to get new ones for cheap: all such policies are subject to strict "preexisting condition" clauses.

Powerless in Minneapolis

Not So Xcellent

No, this isn't a post about how ordinary citizens no longer control this country's financial laws, or economic policy generally.

It's about literally being without power in Minneapolis.

From 9 a.m. Saturday morning until 6 p.m. Sunday night.

With my in-laws staying with us.

Just a Minute. Not.

For non-Minnesotans reading this blog, the season's first, big winter storm descended late Friday night, dropping about 8" of very heavy snow in the Twin Cities over the next 24 hours.

It's unusual for a storm to knock out power, and if it does, it's unusual if the outage lasts more than a couple hours.

Which is still (very) cold comfort when find yourself going to sleep on Saturday night around 8 p.m. in a pitch-dark house with no heat.

Dodging a Bullet?

In fact, mild weather (mid-30's) mitigated what could have been a much worse situation.

Instead of well-insulated homes hovering in the 40's and 50's, my and my neighbors' homes could have plunged in temperature, threatening both people's physical safety and plumbing.

(Don't think frozen pipes are a big deal? They can cause tens or even hundreds of thousands in damage to a home.)

Posing an even more immediate threat: the downed power line in the alley a block away from me.

Called in by multiple neighbors Saturday morning, Xcel Energy had yet to attend to it by late this (Sunday) afternoon.

If there had actually been electricity flowing through those lines, someone could have been electrocuted.

Shades of Katrina

According to Xcel Energy's voice recording, the storm knocked out power to 80,000 metro customers, and it was busy dispatching repair crews -- some from nearby states -- to fix things as fast as it could.

If so, its crews did a very good job of hiding in my very centrally located Minneapolis neighborhood (Exhibit A: doing nothing about a downed power line).

Nor, apparently, did any Xcel Energy senior executives deem 80,000 powerless customers a serious enough problem to warrant coming in to work: the customer service representative I ultimately reached handed me up to a supervisor, who informed me that her supervisor wouldn't be available till 9 a.m. Monday.

Also AWOL: the Star Tribune, the local Minneapolis paper, with nary a word (OK, paragraph) devoted to the power outage (non) response.

Short-Handed?

Which leaves the question: why did a big-but-not-spectacular storm throw Xcel Energy for such a loop?

Is the electrical grid more decrepit these days?

Is Xcel scrimping on overtime?

Were the line workers all up north deer hunting?

I honestly don't know.

But whatever financial calculations and contingency plans Xcel made (or didn't), they surely were the wrong ones.

Next time a winter storm knocks out power, temperatures the next 48-72 hours may not be so forgiving.

P.S.: one silver lining in all this? A virtuouso performance by my City Council Member, Lisa Goodman.

In sheer exasperation, I looked up her home phone number Sunday night, and was shocked to find it listed.

I was even more shocked when Ms. Goodman returned my message within 10 minutes.

She proceeded to give me a mini-tutorial on Xcel Energy's inner workings, as well as multiple suggestions for getting action (call the fire dept. if it's genuinely an emergency) and avoiding another power outage (work with neighbors to bury the power line serving our homes).