Vague Specifics June 2022
It would appear the eruption has ended, at least for now.
There is still an ungodly amount of money pouring in from California, the land where people sold their shanties for $2 million and threw it around like Monopoly Money on the DFW market. But with skyrocketing interest rates comes diminished home affordability. And it needs to calm down, at least for a time, before Dallas turns into California.
Above graph for the DFW metroplex and affordability. It measures the median home price in a given area relative to what the typical family can afford with a 30-year fixed-rate mortgage. An index of 100 means the average family can afford the median sales price. We were once at twice that number, now we’re at .75. Dallas was historically one of the more undervalued markets in the United States. Unfortunately those days are over. All the way through 2013 DFW was a very cheap place to live. Now the number hovers around .75.
Interest rates are going to continue to affect affordability, at least for we mere mortals who have not just sold our shanties for $2 million. As of 6/23, a 30-year fixed-rate mortgage is hovering around 6.125%. Still below the historic average of around 8%, but expect them to be up around 7% by the end of summer. In short, the days of cheap money are over.
This has to be the hottest June I can remember. We all must consider the last several years, while humid, have been compartatively mild. We’ve had 6 days over 100 as of 6/22. In all of 2021 we had 8 days, 2020 9, 2019 14 and 2018 23. The record was 71 set in 2011. Here’s to hoping we don’t set any records moving foward, although I’ll take dry heat over humidity.
Pain at the Pump: Saving Gas Mileage
Minus those with electric cars, we’re all feeling the pain of record-high gas prices. A lot of factors got us here, and unfortunately it’s not going away anytime soon. Here are a few thoughts that may help alleviate the sting:
1) Don’t Drive Like an Angry Teenager – The most obvious first. Stepping hard on the gas burns 15-30% more gas than a easy push on the pedal and your car’s gas mileage drops precipitously once you pass 50 MPH. I’m not saying drive 50 on the highway, just take it easy when considering breaking the speed limit.
2) Mind Cruise Control – It’s convenient, but in certain conditions they’re terrible. Going up hills and hitting resume when you’re speed is a lot lower than the set speed are 2 I’ve noticed.
3) Keep Your Tires Inflated – In 2009 during the last gas crisis, then-President Obama made this point. According to the Department of Energy, each tire underinflated by 10 PSI degrades fuel economy by 3.3%. All tires underinflated by 10% reduces your fuel economy by a full 10%. On another note, it’s nice to see gas stations featuring air pumps with integrated pressure meters.
4) Replace Spark Plugs – Each cylinder in your engine has a spark plug. Faulty ones can decrease fuel economy by a whopping 30%. If your mileage suddenly drops, there’s a good chance you have a misfiring spark plug.
5) Rotate Your Tires – Instead of rolling smoothly, a unaligned tire actually creates drag on your car. Improper alignment can hinder your efficiency by a full 10%. If your steering wheel vibrates when you drive, they’re likely out of rotation.
6) Leave Extra Weight at Home – For every 100 lbs of passenger or equipment. you lose roughly 1% of your gas mileage. I mean, carpooling is still the way to go, just know being environmentally conscious is going to cost you!
7) Use the Upside App – FYI I have no business relationship with this company. Upside is an app that prices near gas stations and actually gives you cash back on purchases. I’ve only gotten $11.37 in the 5 or so times I’ve used it, but I’ve also found the cheapest local gas while in unfamiliar areas.
Vague Specifics May 2022
You know that time when you’re about to sneeze when your body has pulled in so much air your lungs are about to explode but before the actual sneeze? That’s what the May 2022 market felt like. Is it the pause before the market crash? Will prices suddenly come falling back to Earth? Will the house you just bought in March suddenly lost 20% of it’s value.
No.
The market has absolutely calmed down since interest rates began to rise towards more historic norms (remember, the average interest rate for a 30-year fixed is 8%), and it’s causing buyers sticker shock. Will this last? No. I’m giving it 6 weeks before people remember they need a home.
The geniuses who predicted “transitory” inflation are now giving us a 50/50 chance of hitting a recession before 2024. A recession is technically defined as 2 consecutive quarters of negative Gross Domestic Product (GDP) growth. The US GDP contracted by 1.4% in the first quarter of 2022, I’d speculate we’re in the middle of a recession. How long it continues I don’t know.
“But John, you trustworthy yet mysterious renaissance man,” I hear you ask, “surely a recession will cause the market to correct.”. Well, dear reader, there are quite a few different types of buyers out there, and many of them view real estate a safer investment than the stock market right now, and they’re putting their money into it. There are also buyers about whom I’ve discussed ad nauseum, namely buyers who sold their Malibu CA shanty for $2.5 million and are giddy with the affordability of DFW real estate. Without them, higher interest rates and an economic recession would likely send DFW into at least a static market.
As I’m writing this, it’s been 24 hours since the shooting in Uvalde. If you’re able, I’m sure there will be relief charities for the families of the victims. If you hear of any, please let me know and I’ll share it on social media. I don’t often chime in social media during tragedies, I’ve learned emotional comments tend not to age well.
Architectural Corner: Spanish Colonial
From Florida to California and throughout the southwestern states, Spanish Colonial homes date all the way back to the 1600’s when Spanish settlers began building their homes in North America.
Characterized by red clay tile roof, thick, white stucco walls, relatively few, smaller windows, and exposed wood support beams, they were designed around hot climates and to maintain coolness inside. Courtyards are also common, long ago used for cooking. Decorations were usually somewhat minimalist. Earlier homes were not well-suited for cold, humidity, and could swell if exposed to too much water, causing the stucco to fall apart.
Spanish Colonials are very popular in newer construction homes now that the technology has allowed for better stucco and central heat, although many builders (like Clifford Hutsell in the early 1900s) abandoned stucco for brick.
Scammers in Real Estate – If it’s too Good to be True…
PT Barnum is credited with having said, “There’s a sucker born every minute.”; which is cynical but not inaccurate. However, scammers are getting more and more sophisticated, and it’s easy to imagine getting taken advantage of, even by professionals in the target industry. I ALMOST fell for a Facebook Marketplace scam 2 weeks ago, and felt like Colombo.
In todays’ internet-driven real estate market, roughly half of the homes I list end up being used by scammers. They take a property that’s for sale, steal the photographs, and list it for lease on real estate sites that allow for owners to directly advertise their rental homes. Their goal is to get deposit money – typically $500 – $1,000 – and the pace of today’s market is on their side because when Realtors aren’t involved, there’s a level of trust that’s almost always assumed between landlord and tenant. They do this for a living, and although they often don’t even live in the US, they can be very convincing.
Need one telltale sign that a rental house is a scam? If it’s listed at a price that’s too good to be true, it’s a scam. They almost always target the lower socioeconomic class, and it kills me when I have a half-million dollar house on the market and field calls inquiring about the house that’s “for lease” for $1,000 per month. Just last week I was walking out of a listing and was met at the front door by a single mother. She had 3 kids under 10 years old in her very modest car, and was about to wire the “owner” $800 deposit. Thank God our paths happened to cross and I was able to stop her. The encounter really got to me. These lowlifes often think all Americans are wealthy, they milk people for money that they genuinely can’t afford to lose, and probably sleep just fine at night. This lady would have been in real trouble if she lost $800, never mind she may have ended up homeless because the lease for her old property was probably up. 3 kids, a small car, out $800 and no place to live.
If you ever happen across a lease (or purchase) online that looks to be too good, please call me and I’ll do some research. I’d rather spend 30 minutes doing some vetting than hear about a friend/client/neighbor getting scammed.
Vague Specifics – April 2022
The madness continues.
It’s a weird time to be a Realtor, and I know I’ll look back on this in 10 years and shake my head that I would complain at such a market. Sales prices are skyrocketing. Sellers are laughing their ways to the bank, buyers are crying tears of joy at the closing table, and the commission checks are certainly cashing. “But John, you dashing yet mysterious champion,” I hear you ask, “Why are you complaining about being a Realtor during the best market in the North Texas’ history?” Well, dear reader, it’s because I’m from Dallas and remember a time when we were among the most undervalued markets in America. Although it took several years for people to realize the return on investment of buying a home, they were usually house-rich and not having to scrape the top of their means to find a good home. Now it’s as if a trap has been laid, with rapidly-appreciating prices as the spring and interest rates as the pressure plate. Rates have gone from under 4% to 5.65% in the last 4 months and will continue to climb. As they do, it will make housing less-and-less affordable until someday the average young person or couple will no longer be able to afford a house inside the 635 loop.
What is fueling this rapid appreciation? As I’ve said before, basic supply-and-demand economics. If tens of thousands of people fleeing California and the west coast is the wood, Covid and supply shortages are gasoline. We’re more than 2-years behind on new construction inventory, causing more demand to be placed on pre-owned homes. However, there is a bit of hope on the horizon with a slight uptick in new single-family inventory compared to March 2021. This might be an anomaly, but hopefully it’s a sign that supply is going to start catching up ever so slightly.
To put interest rates in perspective, the average interest rate going back through the 20th century is right at 8%. It’s hard to complain knowing that about 4.65 or even 5%, but considering what we’ve been used to, buyers are certainly feeling the monthly payment sticker shock.
Vague Specifics – March 2022
I attend a networking meeting every Thursday at a local café. Great group. On the 24th I made my 30-second speech on the expectations some have that the Dallas market is going to “adjust”, and that they’re waiting on that before they buy real estate. I’ve heard people talk about this since 2016, and I’m sorry to say it’s not going to happen, at least barring something so catastrophic that the real estate market is going to be the least of our worries. I remember thinking Covid would crash the market, and it only served to antagonize the high demand with lower inventory. The people who waited to “time the market”, now have to worry about climbing interest rates in addition to that low inventory. It’s difficult to wrap our heads around real estate prices these days because for so long DFW was ridiculously affordable compared to other major metropolitan areas. Unfortunately we’re now victims of our own economic success, and having such a broadly-diversified job market like we do virtually guarantees more and more people moving here the next 20+ years. Frankly I hate it, and as much as I love making people money I hate people are being priced out of neighborhoods.
It’s great to finally be beyond mandates and lockdowns, and I’m pleased to announce my first Spring Client Appreciation Party since 2019. Hopefully the weather will behave, there are only so many people our house can fit. Look for an invitation if you’re a client, former client or referral source.
Lastly I hope you have a wonderful spring. We only get a month or so of perfect weather before the temperature soars, let’s make the best of it.
Beyond Spring Cleaning: Servicing Your HVAC
Maintaining your HVAC (heating, ventilation and air conditioning) system is something that is often overlooked until it is too late. To avoid having to make what can be insanely expensive repairs or a full replacement, follow a few simple steps:
Change Your Filters – The easiest thing you can do is keep your filters clean, and it makes a profound difference in the inherent stress placed on your system. Dirty, clogged filters can lower your air conditioner’s efficiency by 5-15%, and even worse, it can shorten it’s life considerably. Most technicians suggest replacing your filter every 1-2 months, depending on the filter. One thing I’ve also learned in 12 years of real estate is that a dirty air filter is often a sign of a negligent seller, and if the filter looks like it hasn’t been changed in years, chances are other mechanicals are suffering from serious neglect.
Schedule Seasonal Servicing – General rule of thumb is to have a licensed technician inspect your system before your system before the first time you turn on your air conditioner or heater. It’s more of a safety issue with the heater – especially if it’s gas-powered – but if your air conditioner is out of coolant, it can be miserable.
Monitor Your Compressors – It’s important to keep your outside system clean, and free of debris. Leaves will eventually fall into the system, the paint will eventually start to peel, but if you have cottonwood trees nearby, ivy growing, or tall grass, your exterior coils can easily become clogged. Clogged coils will decrease your unit’s efficiency and can end up drastically shortening the lifespan of your system.
Architectural Corner – Postmodern
Rejecting orthodoxy and grand narratives, postmodernism took shape in architecture, art and philosophy alike. While it’s philosophy, in my opinion, is nihilistic, narcissistic and ultimately despicable, postmodern architecture’s creativity and freedom from convention did produce some fascinating buildings.
Beginning in the 1960s, postmodernism hodgepodged (often disdainfully) multiple styles such as classical, modern, arts-and-crafts, giving rise to truly unique buildings. Defying are norms, boasting asymmetry, confusing themes, and taking pride in not fitting in with its surroundings, it is impossible to miss a postmodern office or home.
The house from Beetlejuice is an example of heavily re-fitted postmodern design. You don’t see a ton of postmodern architecture, but once you do you’ll never forget it. For better or worse.