Damn backwards millennials

Posted on February 16, 2015 by grim

From Motley Fool:

Why Millennials Put Mortgage Before Marriage

Millennials continue to confound older generations with an emerging tendency to reverse the traditional order of steps in a committed relationship. Where the norm used to be, “First comes marriage, then comes the mortgage,” a 2013 Coldwell Banker Real Estate survey found that for one in four married couples, joint homeownership came before wedding bells.

Those in the housing markets have definitely noticed this trend of buying a house before marriage. “I find a much higher 
percentage of millennials are the product of divorced or second families,” said Bruce Ailion, a real estate professional with RE/MAX Greater Atlanta. “The expectation of marriage as a forever proposition has changed and thus
, they are not holding off on making major life decisions till marriage — whether that is moving in together, having children, starting a business, or
 buying a house.”
…
So what is it that makes getting a mortgage loan together — definitely a big commitment — easier than getting married first?

Rising costs of weddings. One reason could be the rising price of weddings in the U.S. With the average wedding cost ringing in around $28,000, many couples are putting off that expense in favor of other financial goals, such as buying a home.
…
Financial security. “Often in these couples, one or both feel capable of going 
forward alone with the home if something happened to the relationship either 
before or after marriage,” Ailion said.

High cost of housing. “Another factor: in many markets renting an apartment can be nearly twice as costly as 
owning,” Ailion said.” Many unmarried couples living together are doing so to reduce living expenses. One residence costs less than two.”

Confidently cohabitating. Millennials are more likely to postpone marriage, choosing to live together instead. For instance, from 1990 to 2008, while millennials were moving into adulthood, the share of households headed by a cohabiting couple nearly doubled (to 6.2 million), according to the Census Bureau.

Kear notes that fewer young Americans attach the same meaning 
to a wedding and marriage than previous generations”

Posted in Demographics, Economics, National Real Estate | 100 Comments

How I learned to stop worrying and love pink

Posted on February 15, 2015 by grim

From the Record:

Pink baths: time has not been kind to these tiles

When Stacey Lopis’ friends see the bathroom in her 1960-vintage Hawthorne ranch, they all say the same thing: “You have to get rid of the pink tile.”

Pink bathrooms.

They were built by the millions in 1950s and 1960s ranches, Capes and split-levels, but they get no love from today’s home buyers — even the young buyers who are drawn to other midcentury styles in architecture and design.

“As much as the midcentury modern look is back, it’s still something that people are not going to find appealing,” said Gary Silberstein, a real estate agent with Keller Williams in Woodcliff Lake. “Barbie’s not back.”

But one lover of 1950s design says pink bathrooms deserve more respect.

“Pink bathrooms are emblematic of the design of the period,” said Pam Kueber, who started the websites savethepinkbathroom.com and retrorenovation.com after buying a 1950s ranch in Lenox, Mass. “If people could get their heads around pink bathrooms, they’d understand why something that looks so shocking today is actually a very appealing and wonderful thing.”

Kueber said developers of suburban tract homes started installing pink bathrooms after first lady Mamie Eisenhower popularized the color when she wore a rhinestone-studded blush ball gown to her husband’s inauguration in 1953.

Kueber started savethepinkbathrooms.com after watching people rip them out with “sledgehammer glee” on TV home-improvement shows.

“They’d throw the toilets out the window and guffaw. I was appalled. That’s disrespectful,” she said. “That bath was put in by somebody who loved that color.”

Pink wasn’t the only pastel used in postwar home design, as the nation’s mood turned sunnier. Builders also put in bathrooms that were yellow, blue or green, often with black trim.

“They were exuberant years, and people chose these colors,” Kueber said. “Walking into a pink or yellow or robin’s-egg blue or turquoise bathroom is going to be more uplifting than walking into a greige bathroom, don’t you think?”
…
George Rosko, a real estate agent with Coccia Realty in Lyndhurst, recalls how difficult it was to rip out the pink bathroom in his North Arlington Cape Cod two decades ago.

“What a job,” he said. “The tiles were on concrete embedded in a heavy steel mesh. I was bleeding trying to remove them.”
…
“I hear stories from people who start out hating pink bathrooms and go on our site and come out loving them,” Kueber said. “Here someone gave them permission to love something that’s not necessarily popular. Once you understand why the color was popular, I think it’s really easy to love a pink bathroom.

“I have readers looking for houses with pink bathrooms,” she continued, “so get with the program, people.”

Posted in Demographics, New Development, New Jersey Real Estate | 60 Comments

Housing is expensive, rent or buy

Posted on February 14, 2015 by grim

From HousingWire:

Experts: Unaffordable rents here to stay

Unaffordable rents are making it hard for people to save for down payments, and they aren’t likely to ease up for at least two years, according to the latest Zillow Home Price Expectations Survey sponsored by Zillow and conducted quarterly by Pulsenomics.

More than half (52%) of the respondents with an opinion on this issue said the market will correct the nation’s soaring rents over time, and no government intervention is required. About one-third (35%) of respondents said rising rents are not a problem.

“Solving the rental affordability crisis in this country will require a lot of innovative thinking and hard work, and that has to start at the local level, not the federal level,” said Zillow Chief Economist Dr. Stan Humphries. “Housing markets in general and rental dynamics in particular are uniquely local and demand local, market-driven policies. Uncle Sam can certainly do a lot, but I worry we’ve become too accustomed to automatically seeking federal assistance for housing issues big and small, instead of trusting markets to correct themselves and without waiting to see the impact of decisions made at a local level. Broader federal efforts aimed at increasing real wages and job opportunities will go a long way toward helping renters, but real, lasting solutions to rising rents need to be found locally.”

Posted in Demographics, Economics, Housing Recovery | 57 Comments

The light at the end of the tunnel is a train…

Posted on February 13, 2015 by grim

From the Star Ledger:

N.J. foreclosure rate among highest in nation, but dip may signal ‘light at end of tunnel’

Foreclosures activity in New Jersey fell last month, according to a new report, but the state’s foreclosure rate still remains near the highest in the country.

New Jersey had more than 4,600 foreclosure filings in January, a decrease of 63 percent from the previous month, the RealtyTrac report shows, and a dip of 20 percent from the same time last year. The decline in filings came as the state experienced a sharp dropoff in the number of homes beginning the foreclosure process. New Jersey had roughly 2,100 foreclosure starts in January, an 80 percent drop from the previous month and a 54 percent decline from January 2014.

Daren Blomquist, vice president at RealtyTrac, an Irvine, Calif.-based firm that tracks housing data, said that big drop may be a “light at the end of the tunnel” for a state working through a “massive backlog” of distressed properties.

“We’re getting closer to the beginning of the end of this working through the backlog,” he said.

The number of filings dropped off significantly in New Jersey in 2011 as the courts and lenders responded to reports of irregular foreclosure practices, creating a logjam that has been slow to clear. The foreclosure process in New Jersey is also time-consuming.

Peter Reinhart, director of the Kislak Real Estate Institute at Monmouth University, said “one month does not a trend make” but he said the state should be nearing an end on this issue.

Reinhart noted that the backlogs lenders had in foreclosures have been working their way through the judicial process. Also, he said, “the market has improved a lot” and “job growth, while still behind a lot of states, is definitely better.”
…
The foreclosure rate in Atlantic City ranked the highest nationwide among metropolitan areas with a population of at least 200,000. One in every 338 housing units had a foreclosure filing in January in that area, which has been dealing with the fallout from shuttering casinos and disappearing jobs.
…
Within New Jersey, four of the five counties with the highest foreclosure rates sit in the southern half of the state. Atlantic County tops the list followed by Burlington, Sussex, Camden and Gloucester counties. Hudson County posted the lowest foreclosure rate in the state in January, according to data from RealyTrac.

Posted in Foreclosures, New Jersey Real Estate, Politics, Risky Lending | 74 Comments

Mistakes? So what! Fuggedaboudit!

Posted on February 12, 2015 by grim

From the WSJ:

FHA Looks to Ease Banks’ Worry on Mortgage Mistakes

A U.S. housing regulator is considering limiting one of the most powerful tools federal attorneys have to punish banks for making mistakes in mortgage lending, a move the Federal Housing Administration hopes will encourage banks to give more home loans to worthy but weaker borrowers, according to people familiar with the matter.

Since the mortgage crisis, the government has extracted billions of dollars in penalties from lenders that made mistakes on loans to borrowers who later defaulted. The errors ranged from small mistakes to ones that affected the riskiness of the mortgages.

Because banks must certify that FHA-backed mortgages they originate have no errors, when mistakes are found, the Justice Department has sometimes pursued damages under a Civil War-era law known as the False Claims Act that lets the government recover triple damages. In one high-profile application of the act, the Justice Department a year ago reached a $614 million settlement with J.P. Morgan Chase & Co.

Some banks, believing the penalties are too harsh relative to the errors made, have pulled back from originating mortgages backed by the FHA and argued that the broad “certification” they must make when originating a mortgage should be limited to significant errors. The agency, which doesn’t make loans but sells insurance to make investors whole if mortgages default, guarantees loans for a wide swath of middle-class and lower-income Americans, including those who can only make down payments of as little as 3.5%.

The FHA’s attempt to change the provision shows the tightrope policy makers and regulators are trying to walk. While they want to hold lenders accountable for crisis-era mistakes and retain recourse should the loans go bad, they also want the banks to extend loans to some consumers who have been largely shut out of the mortgage market since the crisis.
…
Lenders typically have pulled back on FHA lending by having more stringent requirements than what the FHA would allow. For example, even though the FHA will guarantee loans to borrowers with credit scores of as little as 580, on a scale of 300 to 850, a bank might not give loans to borrowers with a score below 640.

“The real question to me is, should we be in the FHA business at all?” said J.P. Morgan CEO James Dimon on an earnings call with analysts last July, as the bank still smarted from the $614 million penalty.

The bank seemingly followed through with its threat, reducing its FHA business by 74% last year, while the rest of the FHA market shrank by about 37%, according to trade publication Inside Mortgage Finance. Wells Fargo CEO John Stumpf also has made public statements critical of the government’s enforcement mechanisms and that bank’s FHA business has seen similar cuts.

Posted in Mortgages, Politics, Risky Lending | 100 Comments

Foreclosures drop – But not so much in Jersey

Posted on February 11, 2015 by grim

From HousingWire:

CoreLogic: Foreclosures down 13.7% year-over-year

There were 39,000 completed foreclosures nationwide in December 2014, a drop from 46,000 last year, marking a year-over-year decline of 13.7% and a fall of 66% from the pear of completed foreclosures in September 2010, Corelogic’s (CLGX) national foreclosure report said.

The 12-month sum of completed foreclosures for 2014, at 563,294, is at its lowest point since November 2007 when it was 589,570 and has declined every month for the past 34 consecutive months.

On a monthly basis, completed foreclosures were down 4.9% from the 41,000 reported in November 2014.

To put it in perspective, before the decline in the housing market in 2007, completed foreclosures averaged 21,000 per month nationwide between 2000 and 2006.

Since the financial crisis began in September 2008, there have been approximately 5.5 million completed foreclosures across the country, and since homeownership rates peaked in the second quarter of 2004, there have been approximately 7 million homes lost to foreclosure.

“In 2014, the annual sum of completed foreclosures declined 15% from the 662,000 reported in 2013,” said Sam Khater, deputy chief economist at CoreLogic. “Completed foreclosures last year were less than half the 1.2 million peak in 2010, but remain twice the level of normal activity over 10 years ago.”
…
The foreclosure inventory as of December 2014 made up 1.4% of all homes with a mortgage, compared to 2.1% in December 2013.

Posted in Foreclosures, New Jersey Real Estate, Risky Lending | 115 Comments

NJ homes to get even more expensive

Posted on February 10, 2015 by grim

From the Star Ledger:

Legislation to require sprinklers in new N.J. homes on fast track after Edgewater fire

A bill that would require most new single and two-family homes built in New Jersey to be equipped with sprinkler systems is on the fast track after the massive fire that ravaged an Edgewater apartment complex.

The state Senate’s budget committee today voted 9-1 to approve the “New Home Fire Safety Act,” which would require fire suppression systems — currently mandated in larger projects like hotels, apartment buildings and dormitories — also be incorporated into the smaller homes.
…
The bill (A1698) passed the Assembly in June but had not moved since then. But it was fast-tracked in the upper house after the Edgewater blaze, when it was transferred from the committee where it would normally start to the budget committee — its last stop before a vote in the full Senate.
…
The legislation was passed by both houses in the last legislative session but Gov. Chris Christie refused to sign it in January of 2014, allowing to expire on his desk through a “pocket veto.”

Jeff Kolakowski, director of government affairs for the New Jersey Builders Association, said fire safety has improved drastically in new homes without mandating sprinklers and that it would add $6,000 to the cost of a new home.

“This legislation will add thousnds of dollars to the cost of housing, slow down the housing sector … and make it more difficult for residents to realize the American dream of homeownership,” Kolakowski said.

That testimony drew a rebuke from state Sen. Brian Stack (D-Hudson)

“I just don’t see how you put a price tag on somebody’s life, whether it’s a resident of that structure or a firefighter arriving on the scene. I’m all for selling homes and moving the economy. But at the expense of somebody’s life?” he said.

Posted in New Development, New Jersey Real Estate, Politics | 80 Comments

Why is anyone surprised?

Posted on February 9, 2015 by grim

From the LA Times:

Inaccurate Zillow ‘Zestimates’ a source of conflict over home prices

WWhen “CBS This Morning” co-host Norah O’Donnell asked the chief executive of Zillow recently about the accuracy of the website’s automated property value estimates — known as Zestimates — she touched on one of the most sensitive perception gaps in American real estate.

Zillow is the most popular online real estate information site, with 73 million unique visitors in December. Along with active listings of properties for sale, it also provides information on houses that are not on the market. You can enter the address or general location in a database of millions of homes and probably pull up key information — square footage, lot size, number of bedrooms and baths, photos, taxes — plus a Zestimate.

Shoppers, sellers and buyers routinely quote Zestimates to realty agents — and to one another — as gauges of market value. If a house for sale has a Zestimate of $350,000, a buyer might challenge the sellers’ list price of $425,000. Or a seller might demand to know from potential listing brokers why they say a property should sell for just $595,000 when Zillow has it at $685,000.
…
Back to the question posed by O’Donnell: Are Zestimates accurate? And if they’re off the mark, how far off? Zillow CEO Spencer Rascoff answered that they’re “a good starting point” but that nationwide Zestimates have a “median error rate” of about 8%.

Whoa. That sounds high. On a $500,000 house, that would be a $40,000 disparity — a lot of money on the table — and could create problems. But here’s something Rascoff was not asked about: Localized median error rates on Zestimates sometimes far exceed the national median, which raises the odds that sellers and buyers will have conflicts over pricing. Though it’s not prominently featured on the website, at the bottom of Zillow’s home page in small type is the word “Zestimates.” This section provides helpful background information along with valuation error rates by state and county — some of which are stunners.

For example, in New York County — Manhattan — the median valuation error rate is 19.9%. In Brooklyn, it’s 12.9%. In Somerset County, Md., the rate is an astounding 42%. In some rural counties in California, error rates range as high as 26%. In San Francisco it’s 11.6%. With a median home value of $1,000,800 in San Francisco, according to Zillow estimates as of December, a median error rate at this level translates into a price disparity of $116,093.

Posted in Economics, Humor, National Real Estate | 100 Comments

NYC – Where criminals store their wealth?

Posted on February 8, 2015 by grim

From the NYT:

Stream of Foreign Wealth Flows to Elite New York Real Estate

On the 74th floor of the Time Warner Center, Condominium 74B was purchased in 2010 for $15.65 million by a secretive entity called 25CC ST74B L.L.C. It traces to the family of Vitaly Malkin, a former Russian senator and banker who was barred from entering Canada because of suspected connections to organized crime.

Last fall, another shell company bought a condo down the hall for $21.4 million from a Greek businessman named Dimitrios Contominas, who was arrested a year ago as part of a corruption sweep in Greece.

A few floors down are three condos owned by another shell company, Columbus Skyline L.L.C., which belongs to the family of a Chinese businessman and contractor named Wang Wenliang. His construction company was found housing workers in New Jersey in hazardous, unsanitary conditions.
…
Many of the owners represent a cross-section of American wealth: chief executives and celebrities, doctors and lawyers, technology entrepreneurs and Wall Street traders.

But The Times also found a growing proportion of wealthy foreigners, at least 16 of whom have been the subject of government inquiries around the world, either personally or as heads of companies. The cases range from housing and environmental violations to financial fraud. Four owners have been arrested, and another four have been the subject of fines or penalties for illegal activities.

The foreign owners have included government officials and close associates of officials from Russia, Colombia, Malaysia, China, Kazakhstan and Mexico.

They have been able to make these multimillion-dollar purchases with few questions asked because of United States laws that foster the movement of largely untraceable money through shell companies.

Vast sums are flowing unchecked around the world as never before — whether motivated by corruption, tax avoidance or investment strategy, and enabled by an ever-more-borderless economy and a proliferation of ways to move and hide assets.
…
About $8 billion is spent each year for New York City residences that cost more than $5 million each, more than triple the amount of a decade ago, according to the website PropertyShark. Just over half of those sales last year were to shell companies.

Posted in Economics, NYC, Politics, Unrest | 42 Comments

The zombies are back

Posted on February 7, 2015 by grim

From CNN Money:

Where zombie foreclosures are making a comeback

Vacated by the homeowner and left unattended, zombie foreclosures are still plaguing many housing markets.

Nearly one in four homes in foreclosure at the end of January were already abandoned by the owner before being repossessed, a recent RealtyTrac report found.

And while the number of zombie foreclosures has fallen 6% from the year before, 19 states have seen a resurgence, including New Jersey, New York and California.

The state of New Jersey, for example, saw a 109% increase in total zombie foreclosures, with surges in metro areas like Atlantic City and Trenton. Meanwhile, New York saw a 54% increase, with jumps in the Albany, Poughkeepsie and the New York City metro areas.

Other states, including North Carolina, Tennessee and Virginia, have also seen significant increases in zombie foreclosures over the last year.
Zombie homes often have uncut lawns, shuttered windows and other signs of neglect that can turn away buyers and drag down the value of nearby homes.
…
But an increase in zombie foreclosures isn’t always a bad thing, said Blomquist. He said more of those abandoned homes are finally making their way through the foreclosure process, and are now closer to being resold or demolished.

“Some of these have been sitting there and the bank hasn’t started foreclosure for years,” said Blomquist. “The fact that they’re entering into the public record data that we’re collecting is an indication that the banks are finally moving forward with them.”

The states where RealtyTrac found the most zombie foreclosures — Florida, New Jersey and New York — are also among the states with the most drawn-out judicial foreclosure processes, said Blomquist.

According to RealtyTrac, it takes an average of 1,057 days, or nearly three years, to foreclose in New Jersey, 946 days in Florida and 934 days in New York, waits that are exceeded only by the delay in Hawaii.

Posted in Foreclosures, New Jersey Real Estate | 93 Comments

Up, but just barely

Posted on February 6, 2015 by grim

From the Star Ledger:

Home prices rose in N.J. in 2014, still a long ways off peak

Single-family homes in New Jersey sold for more at the end of last year than they did in 2013.

There’s still a long way to go before the market approaches its 2006 peak, though.

Those are two of the main takeaways from a year-end report released today by Core Logic.

On average, single-family homes in Garden State were 1.2 percent higher at the end of December compared to the previous year, but still 22.9 percent less than when prices reached their high point in June 2006.

Nationally, home prices rose 7.4 percent in 2014. Colorado (8.4), Texas (7.8) and New York (7.6) experienced the largest increases. Still, home prices are off 13.4 percent from their April 2006 peak nationwide.

In Connecticut, the average priced dipped by 2.2 percent, the largest in the country last year. Maryland and Vermont were the only two other states where prices fell in 2014.

The Core Logic report didn’t include actual prices, but a November report from Coldwell Banker said the average price of a four-bedroom, two-bathroom home in New Jersey was $440,354. That was the fourth-highest in the nation.

Posted in Housing Recovery, New Jersey Real Estate | 110 Comments

Death and Taxes

Posted on February 4, 2015 by grim

From the Star Ledger:

N.J. property taxes top $8,000 per home after rising 2.2 percent last year

New Jersey’s sky-high property taxes rose to new heights last year, from an average $7,988 in 2013 to $8,161 in 2014, according to data from the Department of Community Affairs.

The nearly 2.2 percent increase breaks down to an extra $173 for the average property taxpayer, on top of what were already the highest property taxes in the country.

That distinction was cited by as a major reason half of residents polled by Monmouth University in September said they don’t want to live out their days here. A quarter of residents who described themselves as “somewhat likely” to move, blamed property taxes.

New Jersey collects nearly $3,000 per capita in property taxes, while according to the Tax Policy Center, a non-partisan, joint venture of the Urban Institute and the Brookings Institution, 79 percent of American homeowner paid less than $1,750 in property taxes each year, and only 3 percent paid more than $4,000.

Just 0.2 percent of U.S. homeowners paid more than $8,000, which is less than the new New Jersey average.

Property taxes last year rose fastest in New Jersey’s Hudson County. There, the average tax bill climbed 7.6 percent, from $7,467 to $8,034. The highest average tax burdens could be found in Essex, Bergen and Union counties.

Tax bills have increased 12 percent since Gov. Chris Christie took office, less than under his predecessor, Democrat Jon Corzine. A spokesman for Christie did not respond to a request for comment.

Bills that were climbing at least 7 percent annually from 2004 to 2006 rose just 2.4 percent, on average, in 2011, 1.6 percent in 2012 and 1.3 percent in 2013, thanks to reforms Christie and the Legislature put in place capping property tax increases and the amounts police and fire unions can win in arbitration at 2 percent.

Posted in New Jersey Real Estate, Politics, Property Taxes | 157 Comments

High closing costs really a surprise?

Posted on February 3, 2015 by grim

From the Record:

Bergen County home closing costs top $10,000

Buying a home in North Jersey is expensive, and we’re not just talking about the purchase price.

Closing costs top $10,000 in Bergen County – the highest in the state – and $8,000 in Passaic County, according to a new survey by a personal finance website, SmartAsset.com. This is the first year SmartAsset has studied closing costs.

Those costs include “every possible fee you could be charged,” SmartAsset.com said, including inspection fees, title insurance premiums, appraisal costs and attorney’s fees, the website said. It also includes prepaid property taxes and prepaid home insurance premiums.

Annekee Brahver-Keely, an agent with Russo Real Estate in Teaneck, said that closing costs can vary depending on such factors as how high a town’s property taxes are and how much the lawyer charges.

“There are a lot of variables,” she said.

AJ Smith, managing editor for SmartAsset.com, agreed that while some closing costs are fixed, home buyers can shop around to reduce their costs – for example, comparison-shopping for a lawyer, homeowners insurance and other costs.

Bergen and Passaic county closing costs come in at about 2.2 percent of the median home price in each county – about the same percentage as statewide and nationally, Smith said.

Bergen’s closing costs, at $10,265, reflected its high median home values. Morris was close behind, with closing costs of $9,939. Hudson County, at $8,031, was about the same as Passaic ($8,044).

Under federal Housing and Urban Development rules, lenders are required to provide a “good faith estimate” of these costs within three days after a buyer submits a loan application.

Posted in New Jersey Real Estate | 62 Comments

Which NJ is this?

Posted on February 2, 2015 by grim

From NJ 101.5:

Help wanted: Highly-skilled workers are in short supply

The improving U.S. economy brings with it a growing demand for workers with highly specialized skills — skills that many companies are finding to be in short supply.

“Today, companies are looking for specialists,” said Rich Singer, senior vice president director of permanent placement at Robert Half International, a recruiting and placement firm.

Singer said finding people to fill positions in accounting and information technology (IT) is especially challenging for companies.

In New Jersey, workers in high demand include those who specialize in pharmaceuticals, biotech, real estate, consumer products and construction.
Quite simply, there just aren’t enough workers to fill these positions.

Singer said the national jobless rate for IT professionals right now is less than one percent, and in many accounting specialties, it is less than three percent. The jobless rates for these two fields is lower than the overall national unemployment rate of 5.6 percent.

Over the next 10 years, the U.S. Chamber of Commerce projects double-digit growth for accounting professionals. “There’s just not enough of them to go around,” Singer said.
…
“There’s a lot of marginal people who are looking for work,” Singer said. “But the good candidates have a shelf life (on the market) of several weeks to three or four weeks, if that. And they’re getting multiple offers.”

Additionally, Singer said, it is difficult to find people “who are really motivated, who have a really good career path, who are willing to work hard.”
For some firms, recruiting is only half of the staffing battle. Retention of their star employees is the other half.

“If you (employers) don’t take care of your employee – the compensation level and work-life balance – there is a good chance in the next year or so you are going to lose that person,” Singer said.
…
Those in demand can often write their own ticket, Singer said. “There’s tremendous competition for employees.”

Posted in Economics, Employment, New Jersey Real Estate | 78 Comments

New rule of real estate … Starbucks, Starbucks, Starbucks.

Posted on January 31, 2015 by grim

From Quartz:

Confirmed: Starbucks knows the next hot neighborhood before everybody else does

What fuels gentrification? The answer is the same thing that fuels the rest of us: coffee.

But not just any old cup o’ joe.

Starbucks, the iconic coffee roaster and retailer, has grown into a $15 billion company, with more than 19,000 locations in more than 60 countries. You can spot that familiar green-and-white logo from Saudi Arabia to Switzerland, in a Dubai shopping mall, or on a Carnival Cruise ship. Where the Berlin Wall once stood, there’s a shiny new Starbucks instead. Conveniently, one of our desks has a view of the original Starbucks store in Pike Place Market.
…
To explore exactly how closely the two correlate, we compared a database of Starbucks locations with Zillow data. And since Starbucks’ corporate headquarters in Seattle is located just a few miles down the road from Zillow, we also took the opportunity to pay our neighbors a visit, and to pick the brains of Starbucks’ own real estate analytics team—the whizzes who determine where to put that next Starbucks location.

Here’s what we can tell you: Starbucks equates with venti-sized home-value appreciation. Moreover, Starbucks seems to be fueling—not following—these higher home values.

And the reason why is that Starbucks’ real estate choices are, in their words, “as much an art as a science.” When deciding where to hang its next shingle, the company marries right-brain ingenuity with hard-headed, left-brain analysis—exactly as you should.
…
What does that look like in practice? Let’s look at the historical home value appreciation of areas that now are located within a quarter mile of a Starbucks. A home that is now near a Starbucks would have sold, on average, for $137,000. A home that is not near a Starbucks would have sold, on average, for $102,000.

Fast-forward 17 years to 2014. That average American home has now appreciated 65%, to $168,000. But the Starbucks-adjacent property has far outpaced that, appreciating 96% to $269,000.
…
To examine that possibility, we took a look at another prominent coffee chain, Dunkin’ Donuts.

What did we learn? Homes near Dunkin’ Donuts reflect a similar historical trend. But while they appreciate faster than the nation’s housing as a whole, they still don’t appreciate as fast as properties that are now a quarter-mile from a Starbucks.
…
Whatever the reasons—because they genuinely like drinking coffee, or because they see Starbucks as a proxy for gentrification—it seems pretty clear that people are paying a premium for homes near Starbucks. And furthermore, it looks like Starbucks itself is driving the increase in home values.

Posted in Humor | 51 Comments