Thursday, September 22, 2016

I'm back.

I’m back.  I know I've not written a blog for a few short months, and I never let that kind of time go by without getting you an update on the real estate market or a bit of information about managing money, or whatever.  But I’ve been away.  At home.

Truth be told, I had a heart situation and had open-heart triple-bypass surgery.  When that happens to you, the doctors and all the wonderful medical people around them tell you to take some time to lay back, take long walks and heal.  I did.  And now I’m back.

The nice thing about it is that I’m refreshed, newly energized about life and ready to go conquer the world.  The great people at WK Real Estate were fantastic about taking care of my clients and friends in their home and investment needs while I was away, but now I can’t wait to see you again.

I’ve been doing a lot of thinking on those long walks.  Money is so important.  Not compared to so many other things in life, but it’s the thing we don’t talk much about.  We don’t share our income and expense data, our budgets or what’s in our investment portfolios with even our closest friends.  Studies have shown that money is the most common subject about which we lie.  We talk openly about our spouses and kids, our vacations and plans for what we’ll do in our retirement years, the books we read and movies we see, and the things we’ve done in our lives.  Not money.  Money and how we manage it is a very private thing.

So I write these posts, because if we don’t talk about money, we don’t learn about money.  A good friend recently asked me about budgeting.  He’d read an article and thought it might be a great idea.  To me, it’s the very first thing we ought to have learned about money as we grew up.  To me, everybody should actively budget.  To me, it’s common sense.  People just don’t know much about it.

So in the coming weeks and months, I'll be writing these posts again.  Read them, pass them on to your kids and neighbors, call me if you have a name and address you’d like me to add to my mailing list.  Call me with ideas and questions.

This first new post, as I commonly do, let me throw out an idea.

If you own stocks or bonds, mutual funds or even a checking or savings account at a bank, you receive a statement on a regular schedule.  It shows you how much money you have in the account or have invested, the activity in the account, how much interest, capital gains or equity you’ve earned, and more.  You get this monthly, quarterly, or certainly yearly.  It’s important, because you should always know how much you have, whether or not that money is making you more money, slowly dribbling away your hard-earned investments, or crashing.  It shows you how much you have invested in equities, debentures or cash or cash equivalents.  If you understand what you’re reading, it can tell you when it’s time to adjust your asset allocation before the next technical correction, to help you manage the risk of investing where you have.  From it, you plan your retirement.

Statistically, owning a home is the biggest investment most people make.  People have more money tied up in their homes than in anything else in their portfolios.  Yet they don’t get a statement, other than the county assessor sending them a computer valuation for property tax purposes.  I honor tremendously the great work that goes into that valuation, but honestly, it doesn’t truly tell you what’s happened in the market or what your home is actually worth on the market.

So I think people should get a statement on their home.  I think people should get a statement on their investment real estate.  In fact, it’s so important that I think a good, professional person in the real estate industry should sit with them yearly and discuss what’s happened in the markets – nationally, state-wide and locally, and even into the immediate neighborhood in which they live or invest.  I think they should know what their homes and investments are worth.  From there, they can envision their long-term plans as they move from one phase of their lives to the next.  In that meeting, they can ask all the questions they have about real estate.

I’m ready.  If your property is in Colorado, I’d love to be that professional person to show you that statement, and do that on a yearly basis for you.  I think it’s important.  Let’s call it the yearly real estate review.

In this post, I invite you to call me to set a time.  That sit-down meeting at my office or in your home will take about ½ hour of your time.  ½ hour per year.

I love these long walks.  Walking allows me to heal.  It allows me to put things in perspective.  It allows me to set some goals.  It allows me to make some adjustments in my life that might better serve you.  Sometimes ultimately, it allows you to be better informed.

Call me.  We’ll set a time.  I’m very much looking forward to it.  I'm always here for you.


Enjoy the day,

303.541.1920 office
303.859.4467 mobile
mmoger@wkre.com

Saturday, July 9, 2016

Mary Sells Her Home

The “M” word.  Let’s talk about money.

Yes, I know that money is critically important to you.  We all need it to pay our bills.  Sellers have the right to claim for themselves the equity that they’ve built into their real estate holdings.  Buyers have the right too to get the best they can and save some money by getting a better deal.  It’s called negotiating.  It’s what we do at the table.  It's what I've been doing for more than thirty years.

But I have to tell you something that’s going to sound a little strange, and some people are going to throw it away as a passing comment, but it’s true that money is sometimes not the most important big thing at the table.

There’s a tale I’ll tell that happened to me many years ago when I was selling real estate in Port Orchard, WA.  Lois and I had bought our first home.  It wasn’t a great neighborhood.  The home was only 420 square feet.  Just down the road from us was a wonderful older couple I’ll call Mary and Jack.  Unfortunately, Jack passed away, and Mary came to me and told me that she needed to sell her home.  She needed to move down to California to be closer to the kids.  She needed all the money she could get from the home, but it was free and clear of any debts and she thought she could make it all happen with those funds.

I told Mary that we’d get as much as we could for her and make it all happen as quickly as we could so she could move down south.

We listed the home for $37,500.  (Like I said, this was many years ago.)  The home was only about 600 square feet and wasn’t built just absolutely square to the arithmetic standards of today.

I put an ad in the local paper, which is what real estate brokers did as our primary tool for finding buyers back then, and I got two calls on the first day.  I showed the property at 11:00 in the morning to an investor, a lady who owned a number of very inexpensive properties in town.  Mary happened to be there and the investor turned to her and said that she’d have to do some painting.  Mary just nodded.  “And it looks like there’s a roof leak over in the corner there.”  Mary nodded.

The investor then asked Mary outright.  “Will you take less?”

Mary did exactly what I’d told her to do.  She looked this lady square in the face and said very politely, “You’re going to have to talk to my real estate broker about that.”

We left with the investor telling me that she’d think about it and get back to me Monday.

At 2pm that same day, a young couple came to my office.  They were going to have a baby and wanted to go out into the world and buy their first home with about $2000 they’d inherited recently.

I drove them over there.  Mary was gardening in the back yard.  This young couple was just giddy.  They were open with their plans.  

“We can put the baby over in this corner.”  (Again, this was a very small home.) 

“Oh look, Honey, there’s a roof leak.”

“I can fix that, no problem.  I’ve got a ladder.”

When they saw Mary in the back yard, we had a very short conversation.  Basically what it amounted to was “You have a wonderful home.  We really hope to buy it today.”

Back at the office, we talked about money with a lender and all they could do was $34,000, so I wrote the offer.  They really wanted this home.

I called the investor and told her that we had a written offer on the home.  She hated the competition, but really wanted it.  I wrote the offer for her at full price, all cash, and close in two weeks.

There it was.  That evening, I sat with Mary at her kitchen table with two written offers.  I went through them in detail.  She quietly stared at those two documents for some time, and finally asked, “Do I have to take the higher offer?”

“No, not at all.  You can take the higher offer, you can take the lower offer, you can counter one of the offers.  You can do anything you want because you’re the seller and this is the United States of America.  Right now, you’re in control here.”

She smiled.  “I loved those two kids.  I thought that investor lady was rude.  Jack built me this home when we got married many years ago.  I raised my two boys here.  They went to college.  I don’t want her to have this house.  I want those two young people to have it.  They were so nice.  Can I do that?”

I told her that absolutely she could.  She didn’t have to look at the money as the driving force.  She could take less for the home if money was secondary to things that were more important to her.  Even though the money was less, she could choose to sell her home to that couple if she didn't want to sell to a person who was rude to her.
 
Mary signed that offer and we closed that transaction.  That young couple bought their first home.  It surprised me at the time, but the fact is that we play with the numbers all the time.  I play with them when I value the home before I list it, and I play with the numbers at the listing table.  We play with them when we get written offers, and again if we need after an inspection or low appraisal.  We sometimes even play with the numbers at the closing table.

But we never play with the people.  That is critically important.  Know that money – the numbers – are not always the biggest thing at the table.  That is a lesson to learn.  It is a fact to know.  People sell their real estate.  People buy homes.  Always.


If this is the year that maybe you’ll sell or buy a home or investment, call me.  I’m always here for you.

303.541.1920 office
303.859.4467 mobile
mmoger@wkre.com   

Tuesday, May 17, 2016

Why in the World Would I Sell Now?

A client asked me yesterday why in the world he would choose to sell now, right when values are increasing.  Wouldn't it be smarter to hold for a while longer and sell at the top of the market?

He's right.  It's always better to sell at the apex point in the marketplace, when values are higher than they've ever been, and perhaps will ever be.  It's a wonderful thought.

There is that one glaring problem, though, so I asked him outright.  "Could you tell me please exactly when that highest point in the market will be, so that I can call all of my clients and get their properties on the market just then?"

Let's look at some facts.  I always like the facts.

We don't know when the market will change, or exactly when it will peak.  We do know three things.

Firstly, we've had a wonderful run in the past couple of years on our real estate values.  Most people don't know how good it's been, so let's take a look at the numbers.  I always like looking at the numbers.

Following is a chart showing the increase in median sales prices for single family homes in the city of Boulder by month over the past three years, as compared to the median selling prices of homes in the greater marketplace and specifically in Longmont.


The blue and yellow lines are the home values based on median sales prices for the entire MLS area (mostly everything in the NE quadrant of the state north of Denver) and the city of Longmont, respectively.  Adding some detail, we see that the median sales price for homes overall increased over the past one year 10.2%.  Longmont increased about double that at 20.2%.  Very impressive.  

The red line is the city of Boulder.  Ya.  The numbers show a 38.8% increase in median sales price over the past year, now at $760,504.

Before you call your boss to quit your job, I have to warn you not to assume that your home today is worth more than 1/3 higher than last year.  That wonderful 38+ number probably means that more of the more expensive homes are now selling.  It is not necessarily the actual increase in the value of your home.  

Sorry.  Anybody can lie with carefully choreographed statistics.  So secondly, take a look at this other bit of data.


In calendar year 2015, if your home is the average home in Boulder, it increased in value a more modest 13.52%.  Very nice.  Very nice indeed.  But look more closely.

Since 1979, home values in Boulder have done very well.  Some years, we've done very, very well.  But we've not done better than 14.61% in any given year.  In fact, 2015 was the second best year in the past almost 40 years. During that almost 40 years, we've had very good times and some very bad times.  We've lived through and recovered from multiple recessions, lived through technology booms and busts, more than one or two oil and gas booms and busts, and seen about every kind of marketplace you can imagine short of a total collapse of the US markets, and that was even close in 2008.  Our population alone in Colorado increased 1,000,000 people over the past 13 years.

And 2015 was the second best year for home values.  I don't want to be the braggart in the soup line, but you have to wonder how much better it can get.

Finally, one more graph.  This one shows the number of months of inventory we have available for buyers in this current marketplace.


No matter where you are in the marketplace, there's about one month's worth of inventory available.

Explanation.  If no one else decided to sell a home, so no new listings were taken, with the current number of buyers looking to buy now, we would completely run out of available homes to see in one month.  There would be nothing whatsoever for sale.  Nothing to buy at any price.

REALTORS have traditionally thought of 5-6 months of inventory on the market at any given time as healthy.  The buyers and sellers negotiate for the selling price and terms on even ground.  More than 6 months inventory is a buyer's market.  Fewer than 5 months inventory is a seller's market.

I've sold real estate full time for a living for more than 30 years.  I've never seen this.

That's a good reason why you're seeing 38+% increase in median selling prices, and an increase in home values in excess of 13%.  That's why you may want to sell now.  

If you're thinking that sometime in the coming few short years you were planning to sell your home, think about it.  Living in a rental for a short time may be worth the inconvenience.

Call me anytime.  I'm always here for you.

Enjoy the day,
303.541.1920 office
303.859.4467 mobile
mmoger@wkre.com 









   





Friday, May 6, 2016

The weekly update from Freddie Mac is a bit better than last week.

Every Thursday throughout the year, as it has since 1991, Freddie Mac publishes its report on what borrowers paid for average mortgage interest rates throughout the country over the prior week.  Today's average covers Monday through Friday of this past week, and includes both 30-year and 15-year loan numbers, as well as 5/1 ARMS.

The Numbers:

This past week, the average borrower on a 30-year fixed rate qualifying loan got a 3.61% annual rate of interest, and paid 0.6% as a fee for that rate.  For that same loan over 15 years, the average fee was the same for a rate at 2.86%.  Those numbers are minimally better than one week ago.

So what does that mean for you?  Had you secured a mortgage on your home this past week, amortizing it over the next 30 years, you'd have paid $600 as a fee for every $100,000 you borrowed.  Your 3.61% rate on that loan would have resulted in a monthly payment of $455.21 for every $100,000 you borrowed.  (A savings of about $3 over one week ago)

Doing the math, if you borrowed $300,000 against your home, you'd have paid $1800 as a fee at closing to get a monthly payment of $1365.62 a month for the next 360 months.

If you chose the 15-year option, the fee this week would have been considerably less at 0.50%.  That means you would have paid only $500 for every $100,000 you borrowed.  In addition, the interest rate would still have been less at 2.86%.  For every $100,000 you borrowed, your monthly payment would be $683.87 for 180 months.  Doing the arithmetic, a $300,000 loan amount would result in a payment of $2051.61, a monthly savings of just better than $4.00 over a week ago.

When I began selling real estate in the early 1980's, interest rates were around 18%.  Your payment for that same 30-year loan at $300,000 would have been $4521.26.

Amazing.  Been thinking about buying a home?  The timing on mortgage interest rates is right.

Call me as you need.  I'm always here for you.

Enjoy the day,
Mike Moger
WK Real Estate
303.541.1920 office
303.859.4467 mobile
mmoger@wkre.com
www.MikeMoger.com

Thursday, April 28, 2016

Mortgage Interest Rate Update

It's Thursday!  Time for the mortgage interest rate update from Freddie Mac!

Every Thursday throughout the year, as it has since 1991, Freddie Mac publishes its report on what borrowers paid for average mortgage interest rates throughout the country over the past week.  Today's average covers Monday through Friday of this past week, and includes both 30-year and 15-year loan numbers, as well as 5/1 ARMS.

The Numbers:

This past week, the average borrower on a 30-year fixed rate qualifying loan got a 3.66% annual rate of interest, and paid 0.6% as a fee for that rate.  For that same loan over 15 years, the average fee was the same for a rate at 2.89%.

So what does that mean for you?  Had you secured a mortgage on your home this past week, amortizing it over the next 30 years, you'd have paid $600 as a fee for every $100,000 you borrowed.  Your 3.66% rate on that loan would have resulted in a monthly payment of $458.02 for every $100,000 you borrowed.

Doing the math, if you borrowed $300,000 against your home, you'd have paid $1800 as a fee at closing to get a monthly payment of $1374.07 a month for the next 360 months.

If you chose the 15-year option, the same fee would have applied, but the interest rate would be less at 2.89%.  For every $100,000 you borrowed, your monthly payment would be $685.30 for 180 months.  Doing the arithmetic, a $300,000 loan amount would result in a payment of $2055.91.

When I began selling real estate in the early 1980's, interest rates were around 18%.  Your payment for that same 30-year loan at $300,000 would have been $4521.26.

Wow.  Kind of makes you want to buy a home.

Call me as you need.  I'm always here for you.

Enjoy the day,
Mike Moger
WK Real Estate
303.541.1920 office
303.859.4467 mobile
mmoger@wkre.com
www.MikeMoger.com

Monday, April 25, 2016

Madonna and Staging Your Home

I love Madonna.  Kind of.  A bit racy for my tastes, but I think she’s very talented.  And she taught me a valuable lesson about selling homes very early in my career.

Jim Bryan was one of my first bosses in the real estate sales business.  I was only a couple weeks on the job when he told me to get in the car.  He wanted to show me something important.

He drove to a neighborhood about five years old with a couple of homes for sale, and told me he wanted my opinion on the values.  No problem.  I knew the area well.

We walked into the first home and he told me to walk around and let me know what I thought.  The entry was nice.  You could see past the moss rock fireplace through the living and dining areas to the wall of glass in the back.  From the deck, you looked over a quiet ravine with a creek below.  The kitchen was modern, with stone counters and raised panel beech cabinets and all white appliances.

When I walked upstairs, Jim was in the first bedroom, staring at a poster on the wall.

“Who’s this?” he asked.

I had no idea.  A huge stage with a rock band had a tiny little lady you could barely see in the middle of it all.  She was obviously belting out a song and wasn’t wearing much.  In the bottom right corner, I read “Madonna”.

“Oh, this is Madonna,” I said.  “She’s the phenomenal new talent in the rock world.  Very big deal.”

Jim just looked and said, ”I think people should wear more clothes.”

When I finished walking through the home, he asked me what I thought of the asking price.  It was on the market for $84,900.

I knew this was a test, so considered my answer carefully.  “I think that’s fair.  This neighborhood will support that price,” I said.

Next house was three doors down on the same side of the street.  “Let’s take a look at this one,” Jim said.

When we walked in, I knew it was the same floor plan, same size, same builder built in the same year.  Nice rock fireplace, glass wall leading to the deck overlooking the ravine.  Cabinets were raised panel.  Nice appliances.

I found Jim upstairs in the first bedroom.  Amazingly, he was staring at the exact same poster of Madonna on the same wall of the same room.  These neighbors must have been good friends.

But it was different.  This poster was matted, under glass and framed.  The walls were painted a cream color.  I started looking differently at the whole house.  The furniture was leather.  The rugs on the hardwood floors were beautiful Persian-style rugs with colorful patterns.  All of the walls were painted in warm colors, and the rest of the art was actually art.  Real oil or watercolor framed in beautiful wooden frames.  Bookcases were stacked neatly, cut flowers in every room.  Even the dining table was set for a dinner party of eight, with cloth napkins and wine glasses.

“So this one’s asking $89,900,” Jim said.  “What do you think of that asking price?”

Again, I knew this was a test.  After some thought, I avoided the inevitable trap and told him, “You don’t get the furnishings with the house.  It’s the same house as the one down the street for $5000 less.  I don’t see it at $89,900.”

“Which one will sell first?” he asked.

“You don’t get the furniture.  The one for $84,900 will sell first.”

“But which one will sell first?” he asked.

“The one down the block.”

“But which one will sell first?” he asked.  I got it.

“This one, obviously,” I said.  “It’s a much nicer home.”

“Exactly,” he said.  “Let’s watch over the coming weeks and see.”

Jim was right.  The home that was staged beautifully sold three days later for almost full asking price.  The other was on the market for two months longer, and sold for less than the $84,900 they were asking.

It didn’t make sense.  The houses were identical, but one sold for significantly more money in much less time.

Statistics show that a buyer will make up his or her mind on whether or not to buy a home within 18-20 seconds after walking through the front door.  A home either feels wonderful or not.  It’s either home or not.  The rest of the tour is commonly just verifying that there really are bedrooms and bathrooms.

Staging a home is critical in any marketplace.  Sometimes remodeling or refurbishing a whole home, although perhaps expensive, is worth it on the bottom line.  Sometimes it’s not.  But always, cleaning and staging a home is critical.  It is always worth every dime and every hour spent on it.

If you’re thinking about selling your home or investment property in the coming year, it’s time to call me.  I’m happy to walk through with you and talk about what we might do to make those first seconds count.  Fact is, even Madonna, presented well, can help.

Call me as you need.  I’m always here for you.

Enjoy the day,
303.541.1920 office
303.859.4467 mobile
mmoger@wkre.com

Saturday, April 23, 2016

Dollar Cost Averaging

A client of mine and I had a conversation this week about long term investing in real estate.  He started out by asking the common question, “How do you know when to buy?”

I knew where he was going.  Generally speaking, the perfect investment model is Buy Low – Sell High.  It makes sense.  If you buy when the investment costs the least it’s ever been, and sell it when it’s at its zenith in the marketplace, you’ll make the most money you can make with that investment.  It’s timing the buy and sell that make it work.

The problem is obvious.  When you buy, how do you know the price isn’t going to go down in the coming weeks or months, perhaps years?  If the price is going down, you should wait and buy it then.  And when you sell, how do you know the price won’t increase after you’ve sold it?  If so, you should wait until then to sell.  You’ll make more money.

Answer:  You don’t.  You don’t know what the price will be in the near or far off future.  That’s the risk part.  Historically, everyone wants to time it all perfectly, and no one can.

This all assumes of course that profit is the only goal, and you have no need for the money for a specific purpose.  If you have a child entering college, right now may be the time to sell.  He’s going to school in the fall, and isn’t going to want to hear you tell him to wait a couple of years for the market to peak.

But assume that you have no specific plans that restrict your time frame.  Without knowing when the troughs and peaks will happen, how do you time your buy and sell?

Generally speaking, real estate is a long term investment.  Unless you’re buying, fixing and flipping a property, you’re usually in it for a number of years.  That makes it easier, and sets you up perfectly for the Dollar Cost Averaging model.

Dollar cost averaging is simple.  Rather than trying to choreograph your investment portfolio to buy at the lowest trough and sell at the highest peak – and almost always miss one, the other or both – you plan out your investment buying and selling in evenly spaced periods.  You buy one every year, or three years, or five years.  Decide when you will begin needing the money you gain from the appreciating property, and begin a timed selling of the properties evenly spaced out over a specific period of time.  You buy and sell according to your calendar plan, whether the markets at those times are up or down.  Just do it.

Statistically, in dollar cost averaging your portfolio, you mitigate much of the risk of investing, whether you’re buying real estate, stocks, bonds, funds or coins.  Think about it.  If you have chosen to buy a certain class of investment, you’re assuming that the value will increase over time.  If you didn’t, you wouldn’t buy it at any time.  And if you’re in it for a longer period of time, the later years will bring more value that the early years.  That means that, over time, the average price of buying will be less than the current value at any time.  Your risk is therefore less than if you tried to buy at the trough and sell at the peak.

Some of your buys will result in higher or lower returns than others.  But over time, the average return will be higher, simply because they all increased over that time.

People wonder at the sanity of investors jumping into the market when values are declining, and those same people can’t believe when someone sells something while values are increasing.  Statistically, though, those investors make more money than the people who try to time the market.  The absolute reason is that no one can know whether values will increase or decrease tomorrow afternoon, let alone next year.

In the end, investing in anything is something to take seriously.  Suddenly inheriting a significant amount of money and deciding to throw it all into buying Iraqi dinars because you heard that when the government finds its groove, they’ll immediately be worth a bundle is not a plan.  The most successful investors – those people who actually get to retire in a way that’s wonderfully secure and comfortable – are those that plan it out over time and stick to the plan.  That includes their homes.

Don’t wait.  Maybe dollar cost averaging is a place to start.  It’s been a proven plan for many, many very comfortable people.  And waiting to buy or sell until the market changes is not part of the plan.

If you’re thinking about it, call me.  We’ll set a time to get together.

Enjoy the day,
303.541.1920 office
303.859.4467 mobile