Nelson-Moe Group

Home » 2022

Yearly Archives: 2022

The Trajectory Of A Shock

The world has experienced several big shocks over the past 3 years:  A global pandemic, massive supply-chain disruptions, a Russia-Ukraine War, global high inflation, an energy crisis, massive government spending, equity market plunges and sharply higher interest rates…..that’s a lot of shocks to the system! Our world in real estate is probably responding mostly right now to three SIMULTANEOUS shocks:

1.  Rapidly rising interest rates, rising faster than at any time in recent history. While rates are much higher now than 6 months ago, they are not much higher than when they had SLOWLY increased in 2018 to around 5%.

2.  High inflation fueling rapid price escalations….and interest rate hikes.

3.  Inventory Shortages causing price escalations, especially for rentals. 

What happens when you are confronted with a shock (like breaking your leg, for example?):

1.  You rush to a hospital in shock, seeking professional help from the most reliable sources. You are somewhat stunned.

2.  You are in pain. Your life is quite different in a flash. You lose certain things you took for granted and become angry. Why me? How unfair!

3.  You become practical, accepting your predicament and adjust to the new normal and focus on your path to recovery. 

While I see this moment as the GREAT REBALANCING OF 2022, one of the hardest parts of this moment – and this is just a moment – is the fact that what we are experiencing right now stands in sharp contrast to the crazy-active markets we experienced in the prior 18 months. Many had become used to that with some thinking that was ‘normal’. It was not. It was a reactionary market. And it also was not an ‘easy’ market. Yes, things sold in a flash over asking, but any professional knows managing rising markets with multiple bidding is complex, ultra-stressful and draining too. Speak to any buyer’s agent!


So after the pause caused by a shock, a new normal sets in and life goes on. While some say we are not in a recession due to the phenomenally strong labor markets, two quarters of negative growth usually implies a sharp slowdown – or recession – in the economy, this time mostly fueled by high inflation. 


We should, however, feel encouraged: with all the scary, feverish warnings of the ‘coming recession’, the fact that we have actually been living in a recessionary moment for the past several months – and functioning rather well – leads me to believe that we are very well equipped to weather these shocks. Are they easy? NO! Comfortable? Never! Stressful? You bet! And they don’t pass quickly either. But soon, we will look back at this moment and realize that this (inevitable) moment of rebalancing forced us all to see the bigger picture, become more creative, efficient, practical, smarter, prudent and be much better positioned than ever to soar yet again.

Rent-Hyper-Inflation

by Leonard Steinberg

Many parts around the US are experiencing massive surges in rent prices, well above the average rate of inflation. A new report shows that rents rose in 96% of 252 housing markets. In most parts the natural forces of free markets are at work:  when there are 10 renters for one apartment, you can be certain over-bidding will occur. 

Housing represents about 40% of CPI, so what happens in home pricing matters….lots! Nationally, average apartment rents rose 9.4% in the second quarter of 2022 compared with the same quarter in 2021. While that is high by historical standards, it is down from the more than 11% annual increases seen the previous two quarters, and there is an expectation that these increases will moderate to around 6.2% higher than 2021 for the year. Costar is projecting a 4.9% increase for 2023. If rents continue to rise at 4%, $2,500/month rent today could be $3,700/m a decade from now.

In many areas where people moved after the pandemic for a more affordable lifestyle, rents rose even more, making these areas a lot less affordable than imagined when you consider the average American spends over 30% of their income on rent. 80% of municipalities saw the average rent increase by 10% or more. Miami had the biggest increase in average rent, rising 59%. Rents are up 31%  in Tempe, Arizona, 21% in San Diego, and 30% in Austin. However, rents have also risen in areas that have always had high rents:  New York, Boston, Los Angeles. 

Why do rents rise?1.  An imbalance between supply and demand.2.  More people focused on renting rather than buying, mostly because of affordability and availability of for sale homes.3.  Rising operational and labor costs for landlords, including rising real estate taxes.4.  Because people are willing to pay the price.5.  Aging housing stock that requires massive renovation and upgrades.6.  Fear of buying/committing to a purchase.

While rent hyperinflation can be great for landlords, some downsides are: 1.  A pro-forma based on exaggerated high rental returns can run into trouble when markets turn. Already banks have started to discount the more over-exuberant expectations.2.  Those who draw capital from properties producing high returns right now could run into trouble if rents subside or vacancies emerge.3.  Governments come under greater pressure from voters to implement laws around rent control and stabilization. Penalties for vacant properties are also possible.4.  When people spend too much on rent, they don’t have money left to spend on other things and this can lead to recession.5.  When rents soar, fees come under attack…..including agent fees!

Most extremes don’t end well. Yes, some rental properties were under-valued in areas where new demand seems long term, but most seem very, very frothy.

Sudden Shock!

When those planes crashed into the World Trade Center on 9/11 and then into The Pentagon and fields of Pennsylvania, the world experienced a devastating, sudden shock. Anything that happens quickly, unexpectedly and boldly is very difficult to process and navigate.

In the real estate sphere we have had to navigate some rather difficult sudden shocks too. In March 2020 as the world shut down due to COVID, we as a profession were in shock. What were we to do? When would markets come back? How would we manage deals in play? There were hundreds of unanswered questions and touchpoints that required urgent attention. This makes life – and business – very difficult. Without exact precedent, predicting outcomes is tough. Reeling from rapid change requires considerably more effort, time and energy. It is emotionally draining. Doubt about choices and fear of the unknown linger and taunt you. It ain’t easy! 

More recently we are dealing with another sudden shock: the unusually rapid mortgage interest rate hikes, faster than at any other time in recent history. All of a sudden buyers and sellers are experiencing heightened levels of anxiety and doubt and we as a profession are scrambling at times to define strategies, re-structure the advice we give to our clients as conditions change almost daily. The stresses of this market are new, although stress abounds in every market. This is just a different kind of stress, a relatively new kind because of the speed. Some listings are taking longer to sell. There are fewer multiple bids. Fewer showing requests. After many months of forming habits and becoming acclimated to certain routines and realities, again we have to shift gears and adapt to new circumstances and new realities…..FAST. All of this would be much easier had we been able to adapt slowly and adjust over time. But alas….here we are! You may lose listings. You may become the second or third broker on others. You will be blamed for lots (that’s not new!). Just always be the calm force of reason, facts, data, insight and intelligence in the face of the storm and your services will remain invaluable.

Unusual times call for unusual measures. Just take one look back to June of 2020, how two short months after our world changed so instantly, our entire profession had adjusted and changed DRAMATICALLY….and was functioning close to full steam. A quick peek at the World Trade Center in Manhattan will leave you CERTAIN we can adjust to anything. So buckle up, move fast, be creative, think, discuss, strategize with colleagues, attend seminars and webinars, read lots, study your markets daily, do the homework – fast – and you will adapt fast too and identify new and old opportunities. They abound in ANY market. Markets will ALWAYS change….that’s the only certainty we have left.

Do We Play An Active Inflation Role?

What can YOU AND I do to curb rising inflation?  I hate to tell you this, but we could actually do LOTS. In an unreal world. But we live in the real world, so……

One of the key drivers of inflation is the cost of housing. In many parts of the country COVID has fueled new audiences. Housing costs, accounting for almost a third of the Labor Department’s consumer-price index, were the largest single driver of inflation in the Atlanta area and similar places in 2021. We in the real estate profession are helping facilitate rising prices …..often MASSIVE price hikes. Have you EVER said to any of your clients in a multiple bidding scenario to take the asking price instead of the offer 10% over ask because it’s their patriotic duty to keep inflation down? HAH! I wouldn’t even attempt to do so. I know the answer. Have you ever told your sellers or landlords not to raise prices when the market is rising? The reality is we live in a free market system driven by supply and demand. I have yet to meet a lottery winner who wishes to redistribute their wins to everyone who lost. I have yet to meet a seller/owner who wishes to take a lower price to help the US economy tame inflation too…..

The reality about inflation is that when demand far outstrips supply, prices rise. That excess demand is fueled by multiple factors. And thrown into the mix is some good old fashioned greed…..and why not if everyone else is doing it? Why not, if we live in a free market capitalist system? We are reaping the rewards on the rise: chances are we will also feel the pain when the markets shift. They always do. I don’t ever recall myself sympathizing with a retail store when they had to discount their products deeply because of a lack of demand……I do recall the pains of real estate markets when we had to slash prices and accept low offers…..or had no showings and no offers. Markets change and they always will. We all play a role in them, consciously and unconsciously…..

Because of COVID, many parts of the US are reeling from even higher inflation rates because those moving in from more expensive parts – accustomed to far higher housing costs and higher wages – are willing to pay much higher prices than traditional ‘local’ pricing. When housing costs rise for locals, they command higher wages. More people moving into one area fuels demand and diminishes supply. Higher wages add to inflation by triggering rising corporate pricing on the goods and services they sell to pay for this.

So next time I complain about rising prices, I will turn to the mirror and ask myself: am I truly innocent of playing a role in this “BECAUSE YOU CAN” pricing moment? No, we are not responsible for inflation but to better understand it, we are witness to its primary causes each and every day. And we are part of the process that facilitates it. Most people will sell something for a higher price – if they can – regardless of costs.
And yes, prices can and do come down…..triggering DEFLATION and discounting…..and we will be active participants in that too when/if the time comes. Free market pricing is all about supply and demand.

RAGE!!!!

by Leonard Steinberg

The past 2 years has triggered heightened rage even in places less prone to this: airports and airplanes, retail stores, restaurants, and yes, even in the brokerage world. Rage is defined as feeling or expressing violent, uncontrollable anger. It is also a historic symptom of pandemics: Spanish flu survivors reported sleep disturbances, depression, mental distraction, dizziness, and difficulties coping at work. Sound familiar?


We all have to pay a big price for rage: usually the damage costs, added security, insurance payouts, etc. are all passed on to the rest of us in the form of higher prices to pay for all of this. Stores that close stop producing sales tax revenues leaving us to pay higher taxes to compensate for these losses. Lost jobs cost more in government payouts. Hopefully the current rage subsides over time. As much as I think there is never a good excuse for this bad behavior, there is always a reason: many people feel marginalized, frustrated, controlled, bullied, angry at the world, etc. While yes, we did lose some of our freedoms during this sometimes painful 2 years, for the most part our version of loss of freedom pales when compared to REAL loss of freedoms that others around the globe experience all the time. Most of us are still the fortunate ones.


Lecturing, belittling, insulting, demanding, commanding never work. Persuasion requires love for your fellow human being. It is the greatest lesson to all of us who negotiate every day. Without love/respect/empathy for your colleagues, clients, buyers, sellers, landlords, developers, etc it would be impossible to navigate the often complex and emotional negotiations we encounter. The one thing we all know destroys (or at best diminishes) chances for successful persuasion is angering the ‘other’ to the point where they stop listening.


We can always persuade others of our point of view (or hard )facts only when they keep listening.

So LET’s all KEEP LISTENING!

The Energy (R)evolution

by Leonard Steinberg

We are in the midst of a rather exciting revolution. It started decades ago when in 2006, US President George Bush – a Texan – boldly claimed: “America is addicted to Oil”. That was a startling admission. Now Texas – the US’s largest oil producer – produces about 7,352 megawatts of new wind, solar and energy storage, the most in the US. The runner-up, California, produces about 2,697 megawatts. I seriously doubt oil is going away, but it is incredible to witness how we are in the midst of a massive transition to more, cleaner (and possibly cheaper) energy.

We are experiencing a massive transformation in our cities, states, towns – and homes – as electric vehicles will shift issues around ‘filling up’, charging stations, power storage, air and noise pollution, energy use, and geopolitical risks associated with energy-related commodities. Auto executives say more than half of U.S. car sales will be EVs by 2030….that’s very soon! Imagine quiet garbage trucks and delivery vehicles in bigger cities. Quieter highways. Our entire infrastructure will need to be updated, not unlike the internet and cable TV which required similar changes decades ago. We are also seeing a rapid growth in Solar use amongst individual homeowners, buildings and corporate America that is adding massive swaths of energy producing entities to buildings and warehouses…..not just because they want cleaner air: Many are doing so for PROFIT and SAVINGS, possibly the best motivator of all.

Around 50% of a home’s energy use is for heating and cooling. The average US home has around 40 lightbulbs…..switching from 60 Watt incandescent bulbs to 8 Watt LED’s reduces lighting energy consumption by 90%! The EPA estimates that the average homeowner can save 15% on heating and cooling costs (11% of total energy costs) by simply adding insulation in attics, crawl spaces, and basement rim joists.  A new modern combi boiler is likely to save  between 20-35% on gas usage. Ah, the combination of high and low technology can serve homeowners well!

While we currently are suffering from dramatically higher energy costs – mostly driven by Opec’s monopoly – the upside is these higher costs may be the ultimate motivator for towns, cities, states, countries, corporations and individuals to produce their own energy – preferably clean, renewable energy – to reduce the exorbitant healthcare costs (Air pollution from fossil fuels costs each American an average of $2,500 a year in extra medical bills -Reuters) and suffering (Some estimate 100,000-200,000 Americans die each year related to air pollution) associated with pollution. Not to mention the big savings most experience when creating their own clean energy. Ask Walmart that has become a power company creating a big chunk of their own energy usage. Ikea reduced its outside energy use by 57% at a Baltimore location. The rooftops of US big-box stores offer enough solar potential to power the equivalent of 8 million American homes…. Homes with (attractive) solar generation now sell for a premium in areas. Lots has to be done to make solar more attractive for homes and integrated rooftiles seem to be the best solution but they still require some refinement.

Most revolutions are a bit messy and can hurt. Governments sadly mostly don’t plan in 10 and 20 year segments, remaining more focused on election cycles. We are experiencing this pain right now. But the future is very bright. Soon we may be living in a cleaner, quieter, healthier world. Far from perfect as all energy sources have their downside too. Bravo to our Texan friends and colleagues for setting such a great example for what is possible!

We would like to get your take on this article since we found it informative so what do you think? Let us hear from you! Have a great day!

Flash Inventory

There is Inventory (less of it these days in most parts!), SHADOW Inventory (those homes and apartments that developers can sell and are for sale but are not officially listed anywhere….and whisper, private listings) …..and then there is FLASH Inventory.

FLASH Inventory is the kind of inventory that often comes to market and is snapped up so quickly it can make your head spin. Sometimes it barely makes it into the MLS systems, although most areas require this. Between the FLASH and SHADOW inventory, consumers would be wisest to work with a professional, on-top-of-it buyer’s agent who can navigate this area of the market – often the market with the greatest opportunity for buyers – efficiently and effectively. Often a buyer’s agent who is both highly competent AND liked by their peers is most effective. 

Recently, we did a sale on a property that had an accepted offer within hours. Not only did the seller like the terms and qualifications of the buyers, but they (and I) also trusted their buyer’s agent implicitly, who also did what was necessary price- and terms-wise to secure the deal, making his buyers instantly the most likable, desirable buyers who also happened to be extremely qualified with zero contingencies because their agent had already done extensive due diligence on the building and unit. He had prepared his buyers with all the comps, knowledge and insights needed to make a smart and QUICK decision, explained valuation thoroughly and factually. His buyers trusted him AND I trusted him….as did my clients. These buyers moved FAST, they were 100% prepared …AND 100% well represented. Strong, smart, professional representation matters (Price does too). AND the likability, trustworthiness and ethical strength of the agent.

In a world where often the best properties trade in a flash, having outstanding representation can make all the difference. Often buyers who enter these scenarios make points and fight battles not worth fighting. Often it is the buyers who lose arguments – or avoid these sometimes petty details – who are left winning the home. FLASH!

Cost Basis

by Leonard Steinberg

When calculating how much your home has increased in value, you have to identify its COST BASIS – meaning anything and everything that you spent to pay for the product. The IRS defines a capital improvement as a home improvement that adds market value to the home, prolongs its useful life or adapts it to new uses. Minor repairs and maintenance jobs like changing door locks, repairing a leak or fixing a broken window do not qualify as capital improvements. Capital improvements and things you can put in your COST BASIS include:

* The price you paid for the property, including settlement costs, such as: title fees, legal fees, recording fees, survey fees, and any transfer taxes or fees you paid in connection with the purchase.
* Additions: An added extra bedroom or bathroom, a deck on the back of the home, a new garage, an added porch or patio….anything that adds value to your home.* Lawn and grounds improvements: Value-adding landscaping projects, driveway or walkway construction, a new fence or retaining wall, adding a swimming pool, etc can qualify as property improvements.
* Exterior improvements: New windows, a new roof, and new siding are examples. Any and all renovation costs including ANY and ALL costs related to that renovation work.
* Insulation: This includes insulation in the attic, inside walls, under floors, or around pipes and ductwork.
* Systems: Installing a new heating or air conditioning system, new ductwork, adding a central vacuuming system, wiring improvements, installing a security system, solar, geothermal, generators, batteries, and putting in lawn irrigation are improvements.
* Plumbing: Installing a septic system, water heater, or soft water system adds value.
* Interior improvements: New appliances, kitchen renovations, new flooring/carpeting, the installation of a fireplace, etc.
* If you needed to make home improvements in order to sell your home, you can deduct those expenses as selling costs as long as they were made within 90 days of the closing.

COST BASIS  does NOT include hazard insurance premiums, moving expenses, or any mortgage-related charges (mortgage insurance, credit report fees, and appraisal costs are out) and general repairs that are essential to keep something working do not qualify. Yard maintenance, HOA fees, and real estate taxes don’t count.

Always check with your accountant when in doubt. Keeping tabs of these costs throughout the lifetime of a house is wise.

Planning For The Day AFTER Tomorrow

by Leonard Steinberg

We all have to eat. So it is natural and understandable to place one foot ahead of the next and focus on today and maybe tomorrow, but as professionals building thriving businesses – and lives – we need to focus as much on the day after tomorrow and well beyond.


Being present is essential in being fully engaged in a career and life. Who knows what tomorrow brings? However, the smartest, most accomplished people and companies plan for long term needs too. They make plans for weeks, months and years from now and put into place plans, projects and protections to be prepared for this future. There is one certainty in life we can all agree on: change. Markets change. People change. Technologies change. Political leadership changes. We age (all of us, sorry!). Being caught off guard can be debilitating.


We are rather disciplined to take out insurance policies, get a good education and save for retirement. These are established habits. And they all have one thing in common: they involve some investment, sacrifice and a little ‘pain’. Wouldn’t it be much more fun to spend that money on a trip or a new car? But we have learned over time that without these things the relatively minor pains we feel now are far less painful than that which we might experience in the event of a disaster without insurance, a career without education or a retirement without savings.


So what are you doing today to plan for the long term? What could you do to insulate your long term future? What can you invest today – whether in time or money – to be rewarded later? Yes, focus on today and tomorrow as your priority, but dedicate some time and thought – and action steps – to some long term planning.

Silly Articles

This past week we’ve endured our fare share of media articles that were either incomplete, inaccurate or downright misleading. Yesterday, The Wall Street Journal published an article about some academics discussing how overpaid real estate agents are and how to fix this problem…..in a publication that supposedly believes in free markets and capitalism.  It was another embarrassing moment for the WSJ which used to focus on facts and data and tell the complete story.

The writer for this article was basically making the case for any entity on the planet that would sharply reduce the excessive fees us agents charge for doing what this troupe deem as ‘quick and easy’ money. The article continued the myth that all agents everywhere earn ALL 6% commission simply by doing a little paperwork, a few showings and bingo! Jackpot!  Not one real estate brokerage or agent was consulted in this embarrassing lapse of journalistic drivel. So while I could go on and break down each and every ridiculous claim and their solutions, I’d rather focus on the more important lesson from this moment.

Here again we see how some of the fame-seeking, drinks-throwing loons on Reality-TV calculating their commissions BEFORE a showing (never mentioning splits or expenses of course….or the time and energy and work that happens well before a transaction and forever afterward) have given the world – even College Professors – the completely false/distorted impression of what we do and how we earn our fees. That’s aside from boasting about the ‘millions’ they make, the private jet lifestyle they lead, etc. The damage they have done over a decade may take a decade to undo……but only if we do something about it.

We as a profession have failed miserably in CLEARLY messaging to the consumer exactly what a PROFESSIONAL agent does to earn their fees. Everything. Not just the open house or the showings. Not just the advertising, marketing, social media management, etc. EVERYTHING. As well as all the planning and advisory work that happens BEFORE something is listed and all the work that happens AFTER the closing. We also have to message the extensive expenses we incur and the mammoth expenses of our brokerage that we participate in with our splits. What does a website, tech tools, offices, staffing, advertising, marketing teams, etc cost to build and operate? WE – not the WSJ or the crafty drivers of this narrative whose sole purpose is to replace us or minimize our income for THEIR gain – must message this. The COMPLETE picture.

So let’s get started. Today. What can you do that messages the WORK and VALUE you deliver, not just the income, glamor, etc. And yes, all of this can showcase beautiful property too. Boasting about our incomes and successes is nice but may also message that we are indeed overpaid and its all too easy. (Most of us never message how tough it was to sell a listing over 18 months…..maybe the time has come to do so!)

PLEASE contact us today and we will show you our VALUE of WORK as agents that we will bring to helping you to get your real estate needs taken care of with professionalism.