I was just reading a real estate-related column on the Denver Post by the Society/Gossip Wag, Penny Parker. It wasn’t exactly hard-hitting, stone-cold economics, but it was pretty insightful. A Denver developer is placing a wager that high-income professionals and aging boomers that are between houses won’t buy a house, but instead will pay big money monthly for a high-brow, state-of-the-art apartment building with fitness, amenities and prime location. Then when life calls, they leave. This developer believes that there is an under-represented segment of the classic, high-income, high-credit professionals in Denver Metro whose housing needs are under-served. They’re under-served, because they’d rather rent.
Over a year ago I read a column from a futurist who theorized a whole new form of ownership for homeowners, a new mortgage vehicle that would allow enhanced mobility. This was a fascinating article, lacking in specifics, a bit delusion about what it would require to transform an entire industry (and capital’s total unwillingness to do that), but it was still really interesting. It was hitting on something: under-served.
Ron Paul is also running for president, and he essentially wants to return American government to the 19th Century. He’s nice and folksy and all, but, have you really read his stances on anything? Or seen his voting record? But the man is popular, and I know some really smart people that are voting Paul. I think he represents something: under-served.
I point out Penny Parker, and the Futurist, and Ron Paul, because they form a triangle of conversation around the same thing: lifestyle in 2012. We know it is changing, but how deep is this change? Have our agreements with our real estate historically panned out?
To begin with, real estate has never been fair. Never. By nature, every piece of dirt is different. This is not 10,000 red Kia’s coming off the production line, this is not 1 million incandescent bulbs, 57 Main Street is different than 59 Main Street and different than 59 Lexington. Every piece of dirt is different. There are different views. Solar yields. Traffic patterns. Dimensions. Topography. Distances to amenities. Sounds. In some cases, smells. When you can actually commodify something, it can be easy to see the relative merits of one over the other. A Red Kia might have higher insurance and unintentionally “say something” about the owner that a pleasant Green Kia might not. But take a single piece of dirt, and look at the dozens – nay, hundreds – of individual variables, and the mind gets perplexed. You don’t hear stories about people who missed out on the investment chance of buying a 2004 Red Kia. You do hear about people who missed out on a chance to buy a bungalow across from the Little Nell is Aspen.
Consumers tend to like easy decisions. We will start the SEVENTH YEAR of post-ceiling real estate in April this year. The market tipped six years ago. The Great Recession began to unravel four years ago. Economic uncertainties and the practicalities of off-shoring of jobs began twenty years ago. To say we live in uncertain times is grossly redundant. Zip is certain. Well, speaking in economic terms, zip is certain.
So that brings us around to this weird thing that used to account for about $1 trillion in annual GDP called “real estate”. If so much economically is uncertain, how can something so heavily rooted in permanence like real estate be that attractive?
I can make all the arguments in the world that there has never been a better time to buy, and I can shout until I’m blue in the face from the top of my building. Where’s my bullhorn? But all I’d gain is a blue face. It really doesn’t matter what I think. It only matter what consumers think.
Correspondingly, who is buying houses?
The ones that understand that real estate is not fair.
Not all neighborhoods are created equal. Great starting point. Not all floorplans are worth living in for 10 years. Another good one. You can’t change your neighbors and rearranging the topography and slope of your lot isn’t that practical, and if there is a possible six-lane road behind you… why would you want to live there a year, let alone ten?
Sustainable is an over-used word in the contemporary vernacular, but people of all political and lifestyle persuasions bandy it around as if it was readily understood. Personally, I like the word “durable”.
The buyers that are buying in 2012 are only interested in durable decisions. They are no interested in fluff. They are heavy, deep-thinkers, and they are looking for value. But value is no longer defined as square footage (note to most of the Colorado Springs HBA). Value is not defined as settling for a ranch home with vinyl floors. Value is not even defined as “new” (this is like a seismic shock in Colorado Springs, where the average age of all residences is less than 32 years old).
Durable must be:
- Readily obvious
- Proven performance
- Worth talking about
- Highly Functional
Durable can be:
- Possibly more expensive (the Mac argument ultimately winning the masses)
- Possibly more personal
- Possibly more spacious
- Or possibly more space-efficient
Here’s a question:
Last year, 60% of all homes listed, sold. This was the highest percentage since 2005. This is encouraging. But here’s my question: with such a high percentage of those bank-owned and short-sold, what of that 40% that didn’t sell? Is there even a price that can cure the 40% that didn’t sell’s inability to sell? Will a consumer buy that house backing to Briargate Blvd for the Pikes Peak View? Will a consumer buy the bad solar idea house on an odd lot? Will anyone buy a 5000 square foot home with a bizarre floorplan on the simple metric that the dollar per square foot is 20% less than anything else in the area?
Real estate isn’t fair. And as the consumer adapts to more durable decision-making, it’s getting less fair every day.