Real Estate Bubble Theorists No More Than Squealers

Have you ever squirted a little kid in the back with a stream of cold water on a hot summer day? I've seen this throughout our neighborhood and it's actually sadistically humorous to watch the little tykes squeal and run away from their parental tormentors.

Those who keep whining about the coming "burst" of the "real estate bubble" remind of these squealers. Sometimes I feel like the lone voice of reason crying out in the wilderness.

The real estate bubble naysayers whine about the "bubble" as if the whole national real estate market were nothing more than another over-inflated stock exchange -- like the New York Stock Exchange and Nasdaq. Folks -- it's not. Real estate, like politics, is local and I wish those real estate journalists scaring the buyers with quotes from their stock market experts would just stop what they're doing and consider some real facts.


Fact: The top hot real estate markets in the U.S.A. are also the top hot job markets.

Fact: Houses are where the jobs go at night.

Fact: Without enough houses in a hot job market, your housing inventory will escalate in price.

Fact: There are "pockets" of over inflated real estate

Fact: Unlike the stock market -- you have to live somewhere. Whether renting or buying, there is an automatic necessity for the ownership of real estate -- either by a homeowner or an investor.
There is no built-in necessity for owning stocks, thus all comparisons between the two products is moot.

In the midst of the hot markets across the country (where the squealing is the loudest and most piercing) citizens of those jurisdictions must look to the local economy to determine their risks.

In the Washington, D.C. area, the Northern Virginia Association of Realtors looks at those numbers every single year at its annual Economic Summit held at George Mason University. Unfortunately, most of the press gives it passing coverage -- I think especially this year, because the economists did not fall in line with "the sky is falling" mantra heard by critics of a strong housing market.

The summit was reported on in the trade association's latest monthly publication, The Update. "In a nutshell, you couldn't be in a better market," according to Dr. Stephen Fuller, Director for the Center for Regional Analysis and School of Public Policy at George Mason University. "If you're worried about some bubble, or slow down, or something that's evil, just put yourself in any other market," he said. "They envy us."

To put it bluntly folks, we're going to have a housing problem in the future -- but it's not the bursting kind. It's the "How can I make $60,000 a year and have to live out of the trunk of my car" kind. You see, in the Washington, D.C. area and other hot job market areas, the reason housing is climbing in value is simply because there's not enough of it.

Dr. Fuller reports the regions surrounding Washington, D.C. have done a fantastic job of drawing jobs to the area -- 287,000 in the last five years. However, they have done a sorry job in providing houses for all these people. This year, there's a deficit in housing in this region of 463,300 units. That means that while people can take jobs here, they won't be able to live nearby to work them. They'll have to commute in a couple of hours.

The numbers don't get any better, Fuller says. By 2030, there will be a shortfall of housing units in the Washington, D.C. area of 716,000 units.

Okay, bubble squealers -- where's the bubble?

The vocabulary being used by journalists is leftover from when the stock market inexplicably rose in value when there was no reason but hype driving the market. Companies were raising lots of venture capital and creating products that they couldn't sell, meaning they ate through the borrowed funds and finally burst.

In hot real estate markets, there's no hype. There are real jobs being created by real companies, creating real products and selling them to real consumers. Real money is being made and these real companies need real employees to make it happen -- local governments should wake up and realize that we need real houses to put them into as well. If you want to quell the fear -- build more houses.

Now -- would all the squealers please stop? You're giving me a headache.


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Mr. Carr has covered real estate since 1989. He is the author of Real Estate Investing Made Simple. Got a personal real estate issue? Post your questions and comments at Anthony's blog.

Published: November 25, 2005

Decluttering Before Remodeling Key to Sanity

If you're looking to remodel your house this year, as thousands of Americans do, be sure to look beyond just the color swatches, carpet samples and appliances. Remodeling is more about shoveling out the junk than anything else.

Particularly true is if you're redoing several rooms at the same time. When I finished my basement, a week after preparing for the contractor, I figured out that I had to actually get a storage unit to put all my earthly belongings into. So I visited Fred.

Fred is that quintessential good-guy neighbor that you see on the television programs. He's not perfect, but pretty darn near it. He's the one the wife says, "Go ask Fred, he'll know what to do." So I knew he had recently remodeled some parts of his house for a wedding and I knew he had chucked a lot of stuff and stored the rest, because he had borrowed my truck to do it. (Hmm ? who's the good-guy neighbor, now?)

Talking to Fred, I found where he had a storage unit and turned to go back to the house and call, but Fred kind of grimaced and shook his head. "What?" I asked. "Well, I got that unit and it was supposed to be for just a couple of months. I really need to dump all that stuff -- I've now had it for two years." We stood there and calculated it for him and the reality hit that he could now be the owner of a very nice multimedia center in his basement with the latest in surround sound technology for the price of what he had put out on the storage unit. Guys take note -- when the wife is touting you to get a unit just for a while, you may be kissing what really matters in life, good-bye.

What is this connection we have with stuff? We really have a hard time getting rid of stuff that we've purchased and won't let go. There are a myriad of websites on this topic and now television shows on major cable networks where we sit amid our own clutter, watching a professional team of cleaners, declutter someone else's house (i.e., Clean Sweep, Mission: Organization, etc.).

The best thing about all these resources is that they all have the same process, and as you look at remodeling, you most definitely need to follow their steps. While these programs point at three boxes to label: Keep, Give Away, Toss (or some derivative of the three); that's fine if you're doing one room at a time. When it comes to remodeling your house -- you may need to pull in three crates outside on the lawn to go through all your earthly belongings.

During this declutter/chunk/giveaway process, you may need to bring in some help, as well. A trusted friend may be able to counsel you in what can be kept and what can be given/thrown away. If you treasure your marriage -- this trusted person is not your spouse. Every excuse is used to hang on to an item -- "Aunt Sally gave that to me, God rest her soul," "Oh, Fred's wife wants that, don't throw it out," or "That's for the baby when she grows into it," while all sounding harmless are really lies from the very pit of hell designed to clutter you into oblivion.

On the other hand, if you and your spouse have moved everything from three rooms into the living room, making room for the contractors, painters, etc., the frustration of having dinner every night right next to your bedroom furniture, can sometimes help both of you overcome all objections and begin to give all your earthly belongings to every tax-deduction-giving charity in the region.

There are some wise steps to take, as referenced earlier. I like the way that OrganizedHome.com Editor Cynthia Townley Ewer does it using the Four Box Method, which is really three boxes and a large trash can (my addition is a trash can on rollers). Identify the boxes as: Put Away, Give Away/Sell and Storage. The large trash can acts as the Fourth Box and thus, this is why Ms. Ewer wins my award for best method. All the other online resources want you to have four boxes the exact same size ? that's a crock. You have to have the much larger "toss" box or you'll just end up moving "stuff" from one end of the house to the other and never really declutter.

To apply this method to a remodeling project, I would suggest again, putting these items in piles in your garage, carport or one room you're not remodeling at the moment. In addition, instead of a Give Away box, go rent a trailer or truck, which becomes your Give Away (and possibly Trash) box.

Just like moving, the remodeling of your house becomes that once in a lifetime opportunity to really chuck out all the stuff that you've been collecting over the years to make room for the things that really matter in life -- your family -- as they gather around your new plasma, 50-inch, digital surround sound media center in your newly remodeled movie room.


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Mr. Carr has covered real estate since 1989. He is the author of "Real Estate Investing Made Simple." Got a personal real estate issue? Questions can be posted at Anthony's blog.
Published: November 18, 2005

Should You Remodel or Move?

Unless you've taken a new job in a new location, the decision to move up may involve deciding on whether to remodel or move altogether. Homeowners nationwide will spend $192.8 billion this year to either remodel or repair their homes, according to the U.S. Census.

The Remodeling Index, provided by National Association of Home Builders' Remodeling Council, determines minor alterations at $25,000 or below and major alterations above that amount. Where do you stand? Is it worth $25,000-plus to remodel or should you move up?

There are reasons in favor of both. Let's deal with the remodeling first.


Your community is great, why move? For some homeowners they already live in the best community for their family and lifestyle. The schools are great, it's near their worship center, shopping and they are plugged in with neighbors and the community. So instead of moving, it might be best to expand or remodel.

Sometimes, it's just time to upgrade the house -- even if you're planning on selling in the future. If you bought a home with 15-year-old appliances and décor, it may be time to switch them out, now that they are 20 or 25 years old. I always get frustrated with homeowners who want to remodel right before they move -- they've never had the opportunity to enjoy the house they've just remodeled. Upgrades may include flooring, bathrooms, kitchen, exterior facelift, paint, curtains, furniture -- not just the house itself.

It might be cheaper than selling. If you're needing more space, the remodel may actually be cheaper than selling, especially if you're looking at finishing or remodeling the basement. The basement remodel is the easiest and most affordable remodel available to homeowners because the exterior walls, plumbing and most electric may have already been run throughout.

You're a do-it-yourselfer. Okay, you love those Old House, Fix-It or Nix-It, Saturday morning programs. Living in a dust-ridden environment with tools and power cords strewn throughout is your vision of heaven on earth. Go for it.

You'll have to remodel the new house anyway. Most new homeowners spend upwards to 30 percent of the value of the new house they just bought fixing it up the way they want -- so why move? Just spend that money where you are.
Now, there are just as many reasons to move instead of remodeling.


The move could take less time and hassle. Depending on the condition of your local market, you may be able to list, sell and move in a shorter period of time than it would take to actually remodel your current home. Time is a major factor in our busy lives, and many times it would be quicker to just move.

Remodeling would disrupt your lifestyle more than you're willing to deal with. You have to hire a designer, then a contractor, move furniture from one area to another in your house, find storage for the rest, live with dust, workmen, etc., for several months and then HOPE you like what you get at the end of it. Better to buy the house that's already finished the way you want it than betting on a finished product you're not sure about.

You don't want the hassle of dealing with contractors in case they don't get it right. The challenge for remodelers is that they are being told by a remodeling-challenged homeowner what they want and then try to create that environment. If the homeowner doesn't like it at the end -- it's very expensive to change once it's done.

Remodeling could cost more than moving. For some people, to get what they really want, they would have to double their mortgage anyway -- so it might be better to check out what's available in new construction or even in a move up in the community. Plus, builders in some markets are starting to offer free upgrades -- including rec rooms, decks, and other add-ons that usually are the subject of a remodel job.

Finally, you're family has enlarged. You just may need a larger home because you have more children or your parents/au pair/adult children have moved in with you.
When it's time to remodel, look over the local real estate market before making your final decision, it might be in your best interest to make that move instead of knocking down a wall.

Mr. Carr has covered real estate since 1989. He is the author of "Real Estate Investing Made Simple." Got a personal real estate issue? Questions can be posted at Anthony's blog.

Published: November 11, 2005

Energy Mortgage Stretches Buying Power

Cooling temperatures around Capitol Hill make me think of ways to get the old home place ready for the winter months in the fickle Mid-Atlantic area and that usually means spending some money on insulation, caulking and the usual home maintenance that keeps the cold air out and warm air in.

There's a mortgage on the market that could be worth a look to help either buy an energy efficient house (or make the one you want to purchase into an energy efficient home). The energy efficient mortgage (EEM) was designed by the U.S. Housing and Urban Development and can also be used to remodel a house into a more energy efficient unit, saving you monthly payments to the power company.

The Residential Energy Services Network (RESN), created by the National Association of State Energy Officials and Energy Rated Homes of America, was established to develop a national market for home energy rating systems and energy efficient mortgages. RESN notes EEM's benefit borrowers in several ways:


The estimated energy savings are added to the borrower's income, allowing him or her to qualify for a higher mortgage amount.

With more borrowing power, the EEM then allows borrowers to roll over the costs of energy improvements into the borrowed amount. All the costs of the energy improvements (up to 15 percent of the value of the home), is allowed to be financed, thus reserving a borrower's cash for more immediate, move-in costs.

The value of the home is adjusted by the value of the energy efficient improvements.
If the house is already energy efficient, then the borrower can use the program to stretch his buying power. Under an EEM, the traditional debt-to-income qualifying ratios are expanded. The idea being that if you're paying less for monthly energy costs, you can afford more for your mortgage payment.

The Federal Citizen Information Center (FCIC), which is the information/publishing arm of the U.S. General Services Administration, has a great online guide about how the program works.

For instance, borrowers with a monthly income of $5,000 could increase their buying power by nearly $16,000 using an EEM (based on a 30-year fixed rate mortgage at 7.5 percent interest rate).

The group lays out a step-by-step guide to acquiring an EEM:


Find the target house, then inform your lender that you want an Energy Efficient Mortgage.

Have a Home Energy Rating Systems review done on the property.
A HERS rating is conducted by a trained energy rater with a cost between $100 to $300 (which can be negotiated between the buyer and seller or financed with the mortgage). The rating ranges from 1 to 100. The higher the score the more energy efficient the house. The score rates the following:


Recommended cost-effective energy upgrades.

Estimates of the cost, annual savings, and useful life of upgrades.

Improved Rating Score after the installation of recommended upgrades.

Estimated annual total energy cost for the existing home before and after upgrades.

The HERS rating is sent to the lender.

The lender evaluates the rating
At this point, one of two things can happen.

The home can qualify for energy improvements, thus the lender puts the extra funds into escrow for the improvements, you close on the house, move in, and then the improvements are completed, paid for out of the escrow.

Or if the house already qualifies as an energy efficient home, then your debt-to-income rations can be stretched if needed, you close on the house and move in.

There are several versions of the EEM, some even allowing 100 percent loan to value financing (i.e., zero down payment financing). Check with your loan professional for a list of programs that meet the EEM criteria.

Published: November 4, 2005

Radon Gas Still Invades U.S. Homes

It seemed about 10 years ago you couldn't open a real estate section in a newspaper without seeing an article about radon -- a colorless, odorless, radioactive gas -- that is the second leading cause of lung cancer in the United States. Radon dissipates to harmless levels once outside, however, it can cause life-threatening vapors when locked in your basement. The gas can enter through underground areas, such as crawl spaces, gaps between basement floors and walls, sump pumps, and the water supply.

The Environmental Protection Agency has recognized the public's lackadaisical approach to radon, which has spurred the agency to launch a new National Radon Strategy on the heels of a National Radon Health Advisory issued by U.S. Surgeon General Richard Carmona. The Chief Physician pointed out on the group's website that "radon gas in the indoor air of America's homes poses a serious health risk. More than 20,000 Americans die of radon-related lung cancer every year. Millions of homes have an elevated radon level."

EPA's Strategy carries the header "Reinvigorating National Attention and Action on RADON," and points out several national action steps, including the testing of all 100 million homes throughout the country. Nearly 20 percent of the dwellings have been tested already.

As you consider testing your own house for this silent killer gas, the National Environmental Health Association provides several questions to ask a potential vendor interviewing companies:


Will the contractor provide references or photographs, as well as test results of 'before' and 'after' radon levels of past radon reduction work?

Can the contractor explain what the work will involve, how long it will take to complete, and exactly how the radon reduction system will work?

Does the contractor charge a fee for any diagnostic tests? Although many contractors give free estimates, they may charge for diagnostic tests. These tests help determine what type of radon reduction system should be used and in some cases are necessary, especially if the contractor is unfamiliar with the type of house structure or the anticipated degree of difficulty

Did the contractor inspect your home's structure before giving you an estimate?

Did the contractor review the quality of your radon measurement results and determine if appropriate testing procedures were followed?
Compare the contractors' proposed costs and consider what you will get for your money, taking into account: (1) a less expensive system may cost more to operate and maintain; (2) a less expensive system may have less aesthetic appeal; (3) a more expensive system may be best for your house; and, (4) the quality of the building material will affect how long the system lasts.

Keep in mind there are certifications radon testers can attain which provides a basis level of education protection for the consumer. With that in mind, the Association recommends that the proposal and estimate include the following:


Proof of state certification and/or professional proficiency or certification credentials.

Proof of liability insurance and being bonded, and having all necessary licenses to satisfy local requirements.

Diagnostic testing prior to design and installation of a radon reduction system.

Installation of a warning device to caution you if the radon reduction system is not working correctly.

Testing after installation to make sure the radon reduction system works well.

A guarantee to reduce radon levels to acceptable levels or below, and if so, for how long.
The National Radon Safety Board operates an online service provider database that makes the search for a radon testing/mitigation company an easier task. Consumers can search for certain professional designations, such as Measurement Specialist (RMS), Measurement Technician (RMT), and Mitigation Specialist (RRS).

For more information on radon gas and its effects on your health and home, visit the following websites:

Environmental Protection Agency

Centers for Disease Control

National Environmental Health Association

National Radon Safety Board

Published: October 28, 2005