Investing in Commodities

Homes are essentially the biggest package of commodities most of us will ever purchase.

The costs for cement, steel, wood, copper and other raw materials has been skyrocketing. In fact, over the past five years, the Producer Price Index has risen 39%.

With an oversupply of homes driving prices down in many markets, the true costs of new construction have yet to be reflected in the prices of new construction homes. New housing starts are down by 33% from August 2007 levels -- the supply will begin to decline which should lead to a slow price recovery in the marketplace.

Reading between the lines, investing in commodities should be a good bet since much of the inherent value is relatively stable -- the costs of the raw materials. Before the price correction happens is the best time to purchase a new (or existing) home, hedging against potential inflation after the market begins its rise. Now is the time --- to the bold go the spoils.

What Women Want

I attended a class sponsored by a local builder on current design trends geared towards "what women want". No rocket science but very interesting.

"Women directly purchase or have a controlling influence in 91% of all new home purchases." - Smith-Dahmer Associates, NAHB IBS 2005

One of the core fundamentals was that women look at homes thru four "lenses".

1. Storing - is there adequate and efficient/neat storage through-out the home. Bedrooms, garage, kitchen, home office, ... ?

2. Entertaining - is the home entertainment friendly -does the flow and layout of the home provide adequate space to entertain friends and family and will my guests see my home as cluttered or neat, organized and welcoming? Food prep pantries were emphasized, an area of the kitchen with a sink and dishwasher that could be used for food prep and the door shut to hide/separate the mess from the rest of the kitchen, the area of the home most often used for entertaining.

3. Flexible Living - do the layout and plans of the home allow for areas to be customized for how the buyer will use the home? Can a room be turned into a dining area, 2nd home office or additional bedroom with just a stroke of the pen on the designs?

4. De-stressing - there must be areas in the home to de-stress. Top areas for this -- tub, outdoor living space, spot to curl up with a good book.

Trends the designer discussed:

- moving the main stairway out of the front entry

- making the rear foyer inviting just as the front foyer is, eliminating the "enter thru the mudroom" design aspect

- turning a standard Jack-and-Jill bathroom into a bathroom with two separate 1/2 baths with their own entry doors and a tub/shower between them.

- removing the tub from the masterbath is gaining momentum in re-models as well as new construction as many people are realizing the tub rarely if ever gets used.

- having a "drop zone" for cell phone charging, laptop storage and mail sorting/recycling at the rear foyer

Overall, it was very interesting to try to predict future trends in home design.

Reality

Over the past 12-24 months, I've realized that reality can be a very difficult pill to swallow. Especially for those of us in real estate -- it's no secret that home prices have come down in Minneapolis-St. Paul and elsewhere.

I've also found that it's sometimes difficult to talk in realistic terms, especially when a realistic view isn't what others want to hear. However, like mom always said - "honesty is the best policy".

When we go to a professional, we don't consult or hire them to tell us what we want to hear, we hire them to give us their honest and professional opinion.

Anyone can sugarcoat the truth. That leads to having to fight reality and since reality always wins, it also leads to un-necessary stress. Reality or bad news isn't like wine. It doesn't get better with age.

Always try to ask the hard questions and be ready to listen to the answers. Question why that's the answer but just don't shoot the messenger.

WET BASEMENTS

I was walking thru a foreclosure the other day with a buyer. No electricity, somewhat rough condition and when we headed down the basement, we were met with about two feet of standing water! Unfortunately, this is a fairly common occurrence, especially with foreclosures.

What to look for

Exterior

• Insufficient or negative grade along the edge of the home--You want at least 1" of slope away from the house for every 12".


• Gutters are almost a necessity.


• Is there a pond, standing water or marsh nearby? Compare the level of the water with the floor level of the basement.

Interior

• Badly cracked or bowed concrete walls are a sign of potential water pressure on the outside of the home's foundation.


• Water marks on the walls, the floor or the trim boards are signs that the basement gets wet on occasion.


• Faint lines on the concrete floor or walls or as noticeable as swollen or soft wall board. Also, look for efflorescence or a white chalky material which is the minerals being pushed thru the cinder block by the outside water.

Some wet basement conditions can be easily remedied by installing gutters, longer downspouts or re-grading the ground away from the home's exterior. Extensive mold or high ground water levels however are MUCH more difficult to remedy if a remedy is even possible. Use caution and look for the warning signs!

A DAY IN THE LIFE OF A REALTOR
It seems an easy enough job. As an agent, your friend tells you about someone who is thinking about selling their house. You give them a call, stop in, and fill out a few forms. Or you spend the day touring beautiful homes with your friends until they find something they like. A short while later, your friend/customer buys a house and you make a commission that seems like a lot of money. The end. Not quite!
Most of us go to work and spend 40 hours more or less, earning our keep. Unless you're on the night shift, you report in the morning and leave late afternoon. You then go home and have dinner with family or friends or maybe run errands or shop. You work hard but within the confines of a schedule that allows for some sort of break in your work week. There is no such thing as a 40 hour work week for a busy agent. Real estate agents are on call 24/7. Why do they do this? For one thing, it's an emotionally satisfying profession and one that requires a considerable amount of skill. However, helping someone through the complicated process can be a lot of time consuming hard work.
Agents must successfully complete many hours of classes and continuing education on a number of subjects, from marketing to mortgage options. To represent you, they must earn a license and keep it current and up to date. Your Realtor must also keep abreast of the changes in the market such as interest rates and the ever changing variety of mortgage possibilities. These days, that's a tough job!
Because Realtors are self-employed, their out of pocket costs include cell phones, pagers, computers, web sites and other marketing tools. In order to travel to and from their listed property or if they are going to transport potential buyers, they need a dependable vehicle. And then there's the need to pay for or contribute to the cost for an office and desk space. All of this BEFORE ever making a sale or earning a commission.
A typical day will include tons of phone calls, some to prospects and many just answering questions, showing property, helping clients through the confusing process of obtaining a loan, explaining the many forms that have to be dealt with, helping a seller with ideas on how to 'stage' their home and assisting buyers by finding just the right home at an affordable price. Agents are usually required to do 'desk duty' for their broker as part of their shared office responsibility. This also adds to your Realtor's busy work week.
One of the most important services provided is helping with the closing. There are lots of important documents and you may feel as if you are signing your life away. Your real estate agent will be a valuable part of your team and can help with the process by asking the right questions and making sure this process goes smoothly. If you have chosen to have your lawyer present, your real estate agent will coordinate with them.
Real estate agents may not know all the answers but they are experts at knowing who to call for quick answers. Over the years, your Realtor has built a network of helpful people that are placed at your disposal. Realtors have a working knowledge of such diverse subjects as building codes, maintenance tips, decorating ideas, current mortgage rates and options plus neighborhood amenities. This is especially valuable whether you are moving cross country or just changing neighborhoods.
By the time the move is over, a good agent will feel like a part of your family -- and hopefully, will remain a friend for life.