Wednesday, April 27, 2011

Home Staging Issues

Here is an article from Bankrate.com that shares many of my concerns about home staging companies and how they manipulate buyers into making offers on properties.

There is nothing wrong with making your home look as good as possible when you go to sell it.  My concerns are with the process that makes them look good on occasion.

Most home staging companies do an excellent job in giving even the most average property a special "je ne sais pas quoi."  But home staging often gets VERY expensive.  A friend of mine recently paid $500 for an "initial consultation" and more than $3,800 for the actual stage.  This sum is in line what most staging firms charge.  This article sites a final sum of more than $6,000.

So what are my concerns about staging companies?  I have four of them.

First, many homebuyers think that staging companies are miracle workers.  If you own a home you should spend money painting, landscaping, and especially CLEANING EVERYTHING before you think about hiring a staging company.  All this is far cheaper and much more effective if you want an offer.  Here is great advice from the NAR on the subject of staging and getting your home prepped for sale.  Here is even more super advice from Realtor.com on the same prepping and staging subjects.

Second, many homes do not need staging.  The technique works best on expensive homes.  Sure, you can sell a 500 square foot studio condo with a good stage but why spend the money to try?  Staging is ideal in luxury settings where rooms are not distinguishable without ornamentation.  Can you tell it's a music room if there is no piano in it?

Third, the interior design skills of stagers are often excellent but, in my opinion, sometimes cross the line into manipulation.  For example, putting smaler scaled furniture into a room to make it larger is an effective technique but it really is just an attempt to fool buyers into believing a room is bigger than it actually is.  Many buyers see through these techniques and they can backfire.  This article discusses the home staging backlash and I will admit I have one too.  When I visit a home that smells of French vanilla coffee and freshly baked bread I immediately go searching for the source of REAL ODORS, like cat urine and mildew in the basement.

But mostly fourth, I think that home staging is a panacea born of the recent super ultra buyer's market where sellers are beyond desperate for offers.  When you have thousands of home owners burying statues of St. Joseph in backyards in the hope this will find buyers, home staging seems a reasonable alternative.

The vast majority of home staging companies I have encountered do a great job.  They have an eye for color, lighting, texture, and decor that most average people (like me) do not have in abundance.  But their fees can often get costly and it is important to never forget they are not miracle workers.  Home stagers can often get a higher price for a great property but cannot turn lead into gold if your condo or fixer property is a stinker.  Follow this advice when you go to sell your properties and you can't go wrong.

Thursday, April 21, 2011

Silver at 31-Year High

Yesterday in this blog I discussed gold breaking $1,502 per ounce.

Today silver hit a 31-year high.  You have to go all the way back to 1980 to find silver at today's price of $46 per ounce.

1980?  Ring any bells out there?  Inflation in the United States in 1980 was a staggering 13.5%.  What signals do you think the market is sending when the price of silver rose 8% THIS WEEK alone?

In other cheerful financial news, gold closed for the first time over $1,500 an ounce and set a new daily high at $1,509.

The U.S. dollar under the brilliant leadership of Bernanke, Geithner, and Obama hit a new 3-year low today against virtually every other foreign currency.  The dollar is being crushed around the world as our Federal Reserve Bank keeps a zero interest rate policy while the rest of the world is drowning in dollars and building barriers to keep them out.  Read this absolutely stunning editorial from today's Wall Street Journal on how the Fed is destroying the U.S. dollar as a reserve currency.

Why should you care about any of this?  You don't own gold, couldn't care less about silver, or the fact that oil broke $112 per barrel today.  The Wall Street Journal opinion piece cited above ends this way:

At an economic town hall this week, President Obama blamed "speculators" for rising oil prices. He should have mentioned the Fed and his own Treasury, which have encouraged the world to invest in hedges against the falling dollar. Chairman Ben Bernanke and Mr. Geithner have deliberately pursued a policy of unprecedented monetary and spending stimulus to reflate the economy and boost asset prices. The bill is coming due in a weak dollar, food and energy inflation, and the decline of U.S. economic credibility.  (emphasis added)


I could have written this myself.  

Wednesday, April 20, 2011

Gold Tops $1,500 an Ounce

I recommended that my readers buy gold at $330 an ounce in 2006.

Today, gold topped $1,502.

The get-rich-quick creative real estate gurus who encouraged you to buy overpriced single family homes to flip them in "the greatest time to invest in real estate ever" in the same year made you how much money?

Oh yeah.  My advice to you was FREE.  How much they did charge you for that home study course and the seminar ticket on preconstruction condo flipping and lease/options?

Oil today is upwards of $109 a barrel.

Gasoline is way above $4.00 per gallon in many markets, including my own.

By summer, many markets will be selling gas for over $6.00 per gallon.

Who in their right mind thinks this is a recipe for economic growth?  Real estate investors will get killed on suburban development in this type of market.

We are seeing an unraveling of the American middle class right before our eyes.  The financial class is running scared towards gold and other commodities while the working class gets higher taxes and inflation and collapsing asset values on all the equity they own, starting with their 401(k)s and homes.

The American Middle Class is being wiped out and all the Obama Administration can do is lobby for S&P not to release its debt ratings on U.S. Government bonds.

If gold hits $2,000 an ounce and oil goes to $150 I would not be surprised at all.  Here is another author that agrees with me.  The children play in Congress spending the hard earned money of others while negotiating how they can borrow trillions of dollars more.

Monday, April 18, 2011

Thank You, Mr. Bullard

St. Louis Fed President James Bullard said today that the Federal Reserve should not exclude energy and food prices from the inflation numbers it targets.

Thank you, Mr. Bullard.  I have been taking that very position in this blog for years.  Here is one such article I wrote on January 28, 2011.  The Fed's core inflation target rate and especially how they calculate it borders on the indefensible.

The Fed does not count food and energy prices in its core inflation calculations.  The Fed correctly argues that the prices on these commodities are volatile, and therefore sharp swings up and down tend to skew the average.

But what the Fed does not realize is that part of inflation is psychological and that food and energy make up the two largest retail purchases most consumers make each and every day.  People buy cornflakes and milk, gasoline and heating oil, steak and potatoes.  All these necessities and many more have been skyrocketing in price lately.  Government officials telling the public there is no inflation when any trip to the gas station or supermarket shows you otherwise makes our elected servants look silly.  It's like the old Groucho Marx line when caught by his fiancee in bed with another woman:

"Who are you going to believe?  Me or your own eyes?"

The Fed needs to get real and start measuring the prices of things real people in the real world buy with real dollars they earned at real jobs, and not build models designed to make a failed expansionist monetary policy look more effective than it really is.

Friday, April 1, 2011

Shadow Housing Inventory

This article from the Wall Street Journal says it all.

Nine months of supply plus 8.6 months of additional supply is 17.6 months of current housing inventory.

Normal supply, or market equilibrium, is usually six months of inventory.

The difference between 6.0 and 17.6 is the size of the Grand Canyon if you are trying to sell homes.

Residential housing prices are going nowhere soon but flat or down.  Of course, each individual geographic market has its own unique demand and supply characteristics, but on a larger level the trend is your friend and it is hard to swim against the tide.  (Intentional mixed metaphor.)

Too much supply, and a rapidly shrinking pool of qualified buyers, plus higher interest rates on the way does not make for a healthy operating environment.

Residential housing in the U.S. does not look too good anytime soon from an investment perspective.

Commercial real estate, however, is another story.  I'll be discussing this sector in greater depth soon in this blog because, quite frankly, the housing sector is dead money for the time being while some commercial sectors are red hot and smoking.