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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.
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!
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!
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!
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.
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.
|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.
|There is a common theme around the globe: home buyers and renters want brand new or newly renovated homes and are willing to pay a premium for them, often a large premium. It’s almost become an obsession. I’ve always been attracted to ‘projects’, but even I’m finding these projects more cumbersome these days. Here are my TOP 10 reasons I’ve identified for the NEW craze:|
1. Time is the Last Luxury: enjoying a home immediately is more meaningful to most. Waiting for a renovation or new build is time lost. The time and effort spent on a home build/renovation project is time you can spend on your career making the money to pay for a home, or enjoy with friends and/or family.
2. In a rising interest rates environment locking in to a rate has value.
3. When you buy a renovation project you need cash or (difficult to obtain) additional financing to renovate. One financed lump sum is quicker/easier.
4. With rising labor and materials costs, anticipated costs for renovation at closing are bound to rise. Most projects go over budget regardless.
5. Consumers want the least aggravation: older systems require more time, effort and money to service, maintain and replace.
6. New homes are usually much more energy efficient.
7. New/renovated homes have been adjusted to today’s lifestyle needs.
8. When you buy one apartment in a 50-unit building by a top architect/interior designer there is economy of scale: you would pay MUCH more for that quality of design for a single home project.
9. Decorating and furnishing is the fun part. Sorting through a complex permitting and approvals process is not nearly as much fun.
10. Seeing exactly what you’re going to get is much easier than imagining what could be.
I am sure that there are many more reasons to add. What ones would you add?
|By Leonard Steinberg|
I awoke this morning in my cozy warm bed and for a moment imagined the absolute dread and fear so many are experiencing right now around the globe, but especially today in the Ukraine. A week ago life was so different for so many and then, seemingly overnight, their world was turned upside down. They are not alone as so many around the globe experience the similar effects of war daily. I just cannot imagine what that must feel like, although I vaguely recall feeling fractionally similarly when New York City was attacked on 9/11.
One thing I remember most about 9/11 was the urgent need for food and …..shelter. My immediate, first instinct was to nest. I headed home. The power of ‘home’ as our safe haven, a sanctuary to be with those you care about most is truly astounding. During those scary and uncertain times where we were not certain whether further attacks were imminent and the stench of smoke filled the air with the odor of war, I will never forget just how much being ‘home’ helped soothe those fears and anxieties.
Yesterday, Ukraine’s practical horrors hit home directly when we heard from one of our vendors who is located in the Ukraine. They had to shut down their business. Their lives were in tumult. They had no idea what their future might deliver and you could sense their palpable fear. At that moment it all became more real to me after seeing images on the TV that often give you a less real impression of what the practical aspects war truly delivers to the people with the least say and power in the matter.
I recall my parents stories of living in war times in Europe and simply could not relate fully to their experience. I lived in war times in South Africa to know a little bit better, although as a kid you simply don’t have the same awareness that you gain in adulthood.
So today, let’s pause for a moment to acknowledge our extraordinary fortune. Maybe not Elon-Musk-style fortune, but the fortune that truly matters most: a roof over our heads, food, safety, lights, heating, freedom, good health, etc. We are indeed the lucky ones.
All of us woke up to a new reality this week as the Ukraine was invaded by Russia and the impact is being felt around the world. The prospect of being someone living in the Ukraine right now is unimaginable to me. In this uncertain time, COMPASS Cares is moving fast to identify a few ways you can help the people of Ukraine right now:
Ukrainian Red Cross Society is collecting donations to help those in need affected by armed conflict, blood collection, mobilization of volunteers and resources and more – Donate Here
United Help Ukraine is receiving and distributing donations, food, and medical supplies to internally displaced Ukrainians and families – Donate Here
Nova Ukraine is bringing humanitarian aid to vulnerable populations in Ukraine – Donate Here
Save the Children is delivering lifesaving aid to vulnerable children in Ukraine and around the world – Donate Here
Our COMPASS community spans many backgrounds and nationalities and I know there are members of our family who are be personally affected by these horrible developments. It’s times like this where community matters even most, but together we can show how much #COMPASSCares.
It is possible that soaring energy costs could trigger a recession. Some believe oil prices could soar as high as $150/barrel. Alienating Russian global supplies is helping drive the price of oil and gas at rather alarming rates, rapidly. Oil and gas impact the price of almost everything and will certainly impact the average consumer’s ability to spend on other things.
The US average consumer consumes over 560 gallons of gas per year. The average U.S. home uses 196 cubic feet of natural gas. Plastics are produced from natural gas, feedstocks derived from natural gas processing, and feedstocks derived from crude oil refining. Almost everything we buy is transported, sometimes long distances, in entities that use gasoline and oil. The US is almost energy independent but pricing of commodities in a global market with OPEC’s baffling control over oil production – imagine if we as a profession formed a cartel to control how much inventory we release into the markets – but it is Europe that is reliant on so much commodity imports that will probably suffer most….thankfully Winter is coming to an end soon requiring less heating.
So is the US heading into a recession? I don’t know. No-one knows for certain. However, its important to note that house prices declined significantly during the 2008-9 Great Recession, but in other modern recessions, house price appreciation hardly shifted, and year-over-year existing-home sales growth barely declined. Home prices and existing home sales don’t necessarily decline just because of a recession. Sometimes the housing market actually benefits by a recession as monetary policy is usually eased to boost the economy, often leading to falling mortgage rates, which increases consumer home buying power that can make homes more affordable.
From July 1981 to November 1982, during the Reagan years, an economic downturn was triggered by tight monetary policy in an effort to fight mounting inflation. It worked, ending a surge of inflation that had started in 1972 and hit a high in the teens in 1980. By 1986 it was under 2%.
A recession may also cool the excessive demand we are currently experiencing – as well as some of the price gouging – which have been one of the prime drivers of supply chain disruptions and rising inflation. Allowing industry to catch up after under-estimating this extreme demand could prepare us for the next surge. Getting the monetary supply balance right will be the key: we want inflation to come down, but we DON’T want tens of thousands of job losses.