The real estate industry must have the best lobbyists in the country. How else can you explain that a data-driven transaction – buying or selling a home – has become more onerous, and more cumbersome. And overall more painful even as information becomes cheaper and easier to get?
These guys are protecting their turf, and we’re paying for it.
My Next Home
As I prepare to buy our next home, I’ve had to jump through a million hoops not once, but twice, proving who I am and where my funds originate.
I’m thinking of inviting the title company to our next holiday gathering. They know so much about us, they’re like family now.
But we’re in the final stretch. In ten days, I’ll buy the new home, and then I’ll sell my current house about two weeks after that. I’m hoping to get a little renovation done before we move in, but that requires cooperation from a contractor, which is always a question.
As we get near the end, I’m dealing with questions about appliances and tile at the new home, and last-minute, minor repairs on the old house. While these are moving targets, one thing remains consistent: Once we move, we will have accomplished several of the things I’ve preached for years. We will shrink our taxable footprint, step out of the way of rising flood insurance costs, and lower our exposure to an extended real estate market.
Given how the economy is unfolding, our timing is pretty good.
The State of Current Affairs
The ISM Manufacturing Index just came in at 47.8, well below the expected reading of 50, which happens to be the dividing line between growth and contraction. The low number is the second consecutive reading below 50, and the lowest reading since 2009. New export orders were the worst, pushed lower by the strong dollar and the trade war.
But if we suddenly lifted tariffs tomorrow, would export orders explode? What major country is doing so well as to want so much more of our stuff? China has its own set of domestic issues while the European Union fights over Brexit and falling German exports.
A weak economy could be President Trump’s undoing, which could drive political change in 2020. I don’t doubt for a minute that such change would drive up my tax bill.
As for flood insurance, those of us who live in nice houses in coastal areas have been subsidized for a long time. The cost of national flood insurance was supposed to move toward market rates in 2013. However, President Obama declared a moratorium when the proposed changes put waterfront real estate in the deep freeze.
The moratorium ends next year, and President Trump has already declared that new rates will be set in April 2020, and will be charged in October.
Location, Location, Location
As for real estate in general, well, there is no such thing. Real estate is always local.
Except for Austin, the Texas market never seems to get too far out of control. But as I’ve gone through the process of selling my home, it’s become clear that higher-priced homes move achingly slow. While homes at the median seem to come and go quickly. Being in a large home on the water, with the economy potentially dropping to a lower gear and flood insurance rates moving higher, seems like a bad plan.
Last week the S&P CoreLogic Case-Shiller 20-City Home Price Index came in flat for the month, and up just 2% over last year. The growth rate has been trending lower for more than a year, moving in a steady march from 6% toward zero.
This is happening with unemployment under 4%, long-term interest rates under 3%, and economic growth muddling along between 2% and 3%.
Manhattan home prices dropped 8% in the third quarter, and prices fell over the past year in some of the hippest places in Californrnia, from Cupertino (-11.5%) to Palo Alto (-12.3%).
I don’t live in either of those places, but I pay attention.
Part of our goal at Dent Research is to give you the best information and analysis we can, so that you can make the most informed decisions. That doesn’t mean you’ll follow my footsteps, selling a great home to get ahead of potential economic changes. But it does let you ponder the possibilities. And hopefully give you the satisfaction that you made a well-considered choice… no matter where you choose to live.