The Accidental Landlord

With the turn in the real estate cycle upon us, there is a whole new sector of realty animal, who find themeselves on the wrong side of the buy & flip fringe. Whether they bought yesterday, or 10 years ago, they intended to sell right now. But a few things needed to happen first: Entitlement changes, condo conversions, marital separations, graduating high schoolers, etc. And while they were waiting, the market changed.

And so by the time it became feasible to sell, these folks didn't like the conditions or the values, so they decided to keep the property and rent it out. And here they are, the 'Accidental Landlords'. According to this site, 1 in 5 landlords was an accidental case. Demographic details are also available at the site.

All the action happens at the margins. Watch these cases to see the emerging trends in the market. This is a potential flop in the supply/demand dynamics of rental and ownership housing. These are likely your first sellers when market conditions inch up.

If you are in the position of feeling forced to hold inventory, its imperative that your financing plan allows you the flexibility to withstand cashflow fluctuations. Don't let selling a home be a limiting factor if you want to move. Learn how you you can prioritize these goals with financing strategies by talking with a certified mortgage planner.

Rocker's House Sells At 37% BELOW Asking!!

Is this a sign of the times? Jack White, of The White Stripes, recently sold his home in Detroit for $590k, a full $340k below the original asking price of $930k. Wow!

I often talk about real estate values being a function of 'micro markets', where local trends may be different from larger national ones. And Detriot has had one of the slowest markets in the past several years. But this is an interesting case - 37% is a big discount!

The value of the home - or anything - is a function of the pool of willing buyers, and what they are willing to pay for it. I don't know how White could have been so far off with the original asking price. I wonder if he expected the fame tie-in to bring a premium to the sale price. But this is a guy who recently put out an album called "Get Behind Me Satan"; not necessarily a title that would be expected to have broad appeal to the folks in the top tax brackets... and the custom design clearly limited the appeal to average home buyers. You'ld have to be a major fan to want to buy the home with White's sense of style. So limiting the appeal to a pool of buyers who may not share his own socioeconomic profile seems to balance out as a 'net negative' in terms of being a high profile case.

No matter what the reason, his expectations were way off.

Home Monitoring Technology

The technology productivity paradox is a theory that says with increased technological development, our productivity advances at a slower rate. Rationalizations of this concept have a broad base of argument.

In a more sociological sense, it could also be considered that a paradoxical effect of technological prosperity is that we, armed with greater access to information, will become so burdened by it that we experience a deterioration in our quality of life. Its a slippery slope.

I saw an article today that summarized an assortment of home monitoring services that can be accessed (some very inexpensively!) from computers, cell phones and even blackberries. You can watch streaming video of your front porch, receive text messages if a door or window is opened, or get a daily email summary tracking movement of people in your home while you are away.

I can see the appeal of all of these, but I wonder what it must be like to go on vacation and be constantly aware of a device in your pocket that could go off at any time without warning to alert you that the gardener accidentally ran over a sprinkler head. Is it worth it?

We have alarms, and alarm servicing companies. The whole point is for them to filter the alerts and decide if its a problem worth interrupting your nap on the beach over. The neighbors are there to watch the dog, and pick up the mail. Do you really need to confirm that it gets done from across the country?

I see the value of 'piece of mind'. But I wonder what the point is of trying to get away if you are going to rely on the constant engagement of technology and to be plugged in all the time. Remember 10 years ago before everyone had a cell phone? Every time I fly somewhere, it cracks me up when the plane lands and half of the passengers start checking voice mail and making calls. What did they do before? Did they run to the pay phone by the baggage terminal, or did they just relax a bit and plug back in when they got home or to the office?

I don't know. Love the concept and appreciate the technology, but tough to find the right balance here between 'peace of mind' and getting away to actually 'get away'...

Are Real Estate Values A Roller Coaster Ride?

Robert Shiller is a Yale Economist who has enjoyed some fame for his book Irrational Exuberance, which was a timely publication that predicted the market correction on the heels of the tech bubble. He's also stayed in the news with an 'Exuberance' redux, where he has predicted the bubble in housing values - every year since the tech bubble. Today's post isn't meant to take away from his theories and predictions, so for now, lets just agree that 'even a broken clock is correct twice a day'... and we can get back into why I say that later on (if interested).

Shiller recently published an index of real estate values indexed for inflation. Before you look at it, we get a pretty fun visualization of of this chart from blogger Richard Hodge. Its worth taking the ride first. Shiller's data is plotted here.

Too Many Jobs!

Non-Farm Payroll and Unemployment data were released today, and the US Economy is still chugging along... For those who feel Federal Reserve Chairman Ben Bernanke will lower rates in the near future, this news serves as a little cold water splash in the face. Unemployment is too low. Plain and simple.

There were 180k new jobs last month, versus the expectation of 135k. Unemployment dipped to 4.4%, versus the expected 4.6%. This is going to keep wage-side inflation persistent, since employers will need to compete for skilled workers by raising pay. And Bernanke has made it clear that no rate cuts will come until the inflation cinders have ceased to smolder. He may even need to hike rates one more time to cap things off.

The Fed Funds Rate remains a moving target, and the timing for adjustment of this rate back down has extended beyond what analysts expected a year ago. Evidence of inflation beyond the Fed's comfort zone has persisted in these types of news reports, and we won't see a change in Bernanke's tone until inflation gets back under 2%.

The meltdown in subprime lending is not going to directly lead to a Fed cut as many have speculated. Even if the housing market languishes due to an increase in supply and decrease in buyers, this needs to trickle through to the data in reports like those given today before the Fed will respond. Perhaps with all the mortgage companies shutting down, we will see a counter-weight to this tight job market...

... I'll be careful what I wish for.