Why Your House Could Be Your Best Performing Asset Class

Since the coronavirus pandemic, its services have expanded way beyond just providing shelter

By Greg Ip
Aug. 5, 2020 8:05 am ET

More than a decade ago consumers and bankers thought houses were surefire investments whose prices never went down. That ended in 2008 with a financial crisis.

It may be time to revisit the thesis. In a world of zero interest rates and bubbly stock markets, your house may once again offer the best returns of any asset class—provided you think of “return” the right way.

Total return is capital gains plus income. With stocks and bonds, the income is dividends or interest—cold, hard cash. But with your house, it is the services it provides, which may not be cashable but are very tangible.page1image49507968

What Homebuyers Want

How pandemic has a%ected what homebuyers want (share of respondents)

Traditionally, the most important service your house delivered was shelter. But since the pandemic, its services have expanded way beyond that.

First, for most workers, it has doubled as an office. Typically 24% of the workforce works from home, and because of the pandemic, 31% more do, according to the Labor Department.

Most will go back to the office when the pandemic is over. But many have discovered they are happier, more productive, or both, working remotely at least some of the time. Because of the pandemic, 62% of hiring managers surveyed by Upwork, an online freelancing platform, expect more of their workforce to be remote from now on.

This saves the employee commuting time and expense, and the employer office space. Those savings could result in either a higher or lower salary. More important, remote work expands the geographic range of jobs available to a worker, which could result in a better fit with higher pay. The net result is that telecommuting

makes having a home from which to work more valuable.

With most schools closed, the home also doubles as a classroom. True, you can’t monetize this. But if your children learn better in a roomy house than a cramped apartment, that is worth something, as is the potential to host home-schooling pods.

Darin LaFramboise used to think of a house as a liability. He and his fiancée lived in an apartment in San Francisco, where they could go running in a nearby park, see a movie a block away and eat out regularly. The money saved on housing expenses went into the stock market.

“All that changed when Covid hit,” said Mr. LaFramboise, a product manager for an identity-management software company. He and his fiancée, a legal analyst, worked from home, trying to insulate themselves from each other’s calls. They didn’t feel safe running on crowded paths. The living room became their gym. The kitchen suddenly felt too small.

So they went “looking for a space where we could live without a mask on: a backyard, a front yard, a kitchen to cook in.” Their Redfin agent found them a house in Lafayette, 25 miles east of San Francisco, with two spare bedrooms to serve as home offices, space for a Peloton exercise bike and a big backyard.

A Seller’s Market

Buyers like Mr. LaFramboise are fueling the housing market. Sales of new homes have already returned to their pre-pandemic peak.

How important is the value of your home to your financial planning? Join the conversation below.

Buyers are gravitating away from dense, expensive cities to single-family homes in affordable suburbs. According to Redfin, condominium prices were down 1.4% in June from a year earlier while single-family homes were up 2.6%. Sales growth has been strongest in the least-dense areas, especially around major cities, according to mortgage and home-sales data analyzed by Edward Pinto and Tobias Peter of the American Enterprise Institute.

Asked how the pandemic affected their homebuying plans, 21% of buyers recently surveyed by Redfin said they want space to work from home, 21% said more outdoor or recreational space, and 7% said a place for children to learn from home. Savvy sellers are catching on: Along with granite countertops and master bathrooms, listings now mention attractive backdrops for Zoom calls.page3image49289408page3image49289600page3image49289792page3image49289984

CORONAVIRUS AND THE ECONOMY

•Blue-State Tax Break Becomes a Flashpoint in Coronavirus-Relief Bill

•Black-Owned Businesses Hit Hard by Coronavirus Pandemic, Study Finds

•Virus Worries Cloud Spending Rebound

One obvious question is whether this rush to the suburbs is fueling a bubble. In late July the median home price was up 11% from a year ago, according to Redfin. An index that better adjusts for the type and location of homes was up 4.9% in May.

Some rise in house prices is justified by lower mortgage rates and some by increased servicespage3image49290176page3image49290368page3image49290560

houses deliver. The pandemic, of course, will end, and with it this extra value. But not necessarily all of it: Some people will continue to work and teach from home.

Yet with unemployment the highest since the 1930s and foreclosures likely to rise when state moratoriums are lifted, don’t assume prices will go up steadily. The investment case for your house today is the opposite of the 2000s when speculators wanted an easy capital gain, not a place to live.

Mr. LaFramboise expects his new home to be a good financial investment but admits he won’t know for many years. More important was “the ability to go in the backyard, grow a garden, and the tranquility that comes with it. And it saves on therapy. The amount of stress in San Francisco is fairly high, and this virus makes it more stressful.”

Write to Greg Ip at greg.ip@wsj.comCopyright © 2020 Dow Jones & Company, Inc. All Rights Reserved

https://www.wsj.com/articles/why-your-house-could-be-your-best-performing-asset-class-11596629101

Designing Your Home to Make You Feel Good and Healthy

By Jennifer Tzeses

From perfecting your lighting to ending noise pollution, here’s how to make your abode better for you

The meaning of “home” has taken on even greater significance lately. As we’re sheltering in place, it continues to evolve as more than just a refuge—it’s a workspace, a place for homeschool, a fitness studio, and a center for entertainment, to name a few examples.

Ensuring a healthy mind and body by cultivating a sense of wellness in our spaces is more important than ever now that our homes have to serve so many purposes.  Below, tips on how to set up spaces within your home that makes you feel good.

Getty Images

Separate Your Workspace

Designating a separate space for work can not only help encourage focus, but it can also help us better decompress when it’s time to put work away for the day. 

“When working at home, we’ve completely lost that point in time where labor and leisure are separated,” said New York City-based architect Kevin Lichten. 

Getty Images

And, if it’s not possible to have a separate room for a home office, Jamie Gold, a San Diego-based wellness design consultant and author, suggests dividing a space with a visual separator, such as a large planter, bookcase or screen to help you “leave” work by closing it off to view when you’re relaxing.

Have Adjustable Lighting

Dimmable lighting and different light sources like floor and table lamps are great ways to encourage relaxation. Downward lighting, which is what most people have in their homes, can be very intense and direct. 

“If you change the light switch so that it’s dimmable, then it suddenly becomes much softer and more inviting and relaxing,” said Gala Magriñá, of Gala Magriñá Design, based in Long Island City, New York. Turning off overhead lighting and even lighting a candle also reduces brightness and fosters relaxation.  

Color temperature is another important factor. 

“As the sun moves through the sky throughout the day, it actually changes in color and that change in color communicates with our body’s circadian rhythms,” Ms. Magriñá said. One of the things it tells our body is whether to boost or lower our energy. The color the sun gives off in the late afternoon before sunset is a warmer, pinkish color versus a bluer color during the day ,when we’re meant to be productive, she said. “So, opting for warmer toned light bulbs in rooms designed to relax in is another great way you can use lighting to encourage relaxation.” 

Photos: Getty Images

Fill Your Space With Plants

Plants create a calming, welcoming atmosphere and improve indoor air quality, Ms. Gold said. “Plants are also proven recovery facilitators, so if someone is dealing with a physical issue, including plants in a meditation area may provide additional wellness benefits.”   

Plants also reinforce our connection to nature, which is known to reduce stress levels, heart rate and blood pressure and boost your mood, Ms. Magriñá said. They also help purify the air by producing oxygen. She recommends adding a bamboo palm, snake plant, Areca palm or spider plant, which “are all great air purifiers and help in removing formaldehyde, which is one of the most common toxins found indoors.” 

Photo: Getty Images

Create Space to Meditate

Setting aside an area to be still, present and focus on breathing can help reduce stress. “This can be as simple as designating a quiet space in your home for daily reflection and gathering in elements you find soothing but not distracting—a favorite rug or mat, a throw, pillow, a speaker for music and a candle and/or plant,” Ms. Gold said. While everyone’s space is going to be a bit different and personalized, “the key is that it’s a quiet, designated area that invites and supports regular, intentional reflection.”  

Gala Magrina

Since meditation requires you to close your eyes and disconnect, which can make you feel a little vulnerable, Ms. Magriñá prefers a small nook or corner of a room next to a window. 

“If you can dedicate an entire room to it with a closing door—even better. However, you really don’t need much to meditate,” she said. Her essentials include a comfortable chair or floor chair (this allows you to sit on the floor but with your back supported) and a blanket to keep you warm.

Gala Magrina

Cultivate Calm 

“Calmness is centered around the idea of congruence,” Ms. Appleton said. “Things having their own place and space in the world, and when they are out of order physically or emotionally, we start to slip into chaos.” Being tidy and identifying a place for your physical things can help you feel calmer and allow you more mental space to think clearly. 

Another way to create calm is by reducing noise pollution. “This can be done during a remodel or new-construction project with your choice of layout and building materials, but it can also be done in an existing home with the addition of things such as plants, rugs, lined window coverings—as well as replacing noisy vent fans with quiet models and hollow core doors with solid models,” Ms. Gold said. 

Photo: Getty Images

Encourage Better Sleep

From a logistical perspective, investing in a comfortable bed, ensuring temperature and humidity are stable and having good window coverings with blackout capabilities all help with getting a good night’s rest, Ms. Magriñá said.  She also believes the lighting we’re exposed to in the evening before sleep plays a huge role in how well we sleep. “I have my living room, bathroom and bedroom lights all on dimmers.” 

Gala Magrina

Ms. Gold recommends installing a digital thermostat that adjusts to a recommended cool temperature, which is ideal for sleep. “If you have a partner whose inner thermostat is different from your—as is often the case–layered bedding lets you choose your coverings according to your preferences,” she said. “Many people can’t sleep with total quiet. For them, a white noise machine or ceiling fan can be helpful.”   

Scents can also help you relax. “I have a lavender spray that I use to spray my pillowcase with right before I go to bed, and by the time I hit the pillow, I am ready for a good night’s sleep,” Ms. Magriñá said.

Gala Magrina

https://www.mansionglobal.com/articles/designing-your-home-to-make-you-feel-good-and-healthy-216841

Atlantic Fine Woods recycles downed city trees into fine lumber

Atlanta Magazine

Atlantic Fine Woods recycles downed city trees into fine lumber

Partnering with tree services, siblings Laura and Joe Sissoko purchase downed trees, typically cut from yards and development sites—wood that would otherwise be mulched or sent to the landfill.

BY MARY LOGAN BIKOFF -JUNE 25, 2020email sharing button

Atlantic Fine Woods
Laura and Joe Sissoko with Buddy, a former stray who found a home as a shop dog at Atlantic Fine Woods in Decatur

When siblings Laura and Joe Sissoko decided to start milling wood in 2012, it wasn’t for furniture, but rather for fine guitars and other musical instruments.

After famed guitar maker Gibson was raided in 2012 and charged with illegally sourcing ebony from Madagascar for its fret boards, the pair became inspired to import the wood themselves. Self-described “Peace Corps babies” born in the Central African Republic, the Sissokos had connections to sustainable loggers in strictly managed forests in the country, where such rare woods—Gabon ebony, Sapele mahogany, Bubinga—are often unlawfully harvested. The only way to control the chain of custody is to import whole logs. But they couldn’t find anyone to mill the logs: Ebony, a much denser species than the hardest American woods, is notoriously difficult to cut. “So, I bought a sawmill and figured it out,” says Joe, who previously had various jobs working with his hands, including in agriculture, before moving into wood. His sister, Laura, is a multimedia artist who studied architecture at Georgia Tech and worked at a furniture company in New York City before taking over operations at the sawmill, which they opened on a stretch of highway in Decatur.

At first, the pair called the company African Figurative Woods and supplied exotic woods primarily to the niche world of fine guitars and other instruments. But in 2014, political strife and sectarian violence in the Central African Republic prevented exports from the country. That’s when the Sissokos turned to domestic woods—specifically local domestic wood. Aside from the exotic species, all of the wood they mill comes from downed trees in the metro Atlanta area, which they dub “urban wood.” Partnering with tree services, the pair purchases downed trees, typically cut from yards and development sites—wood that would otherwise be mulched or sent to the landfill. They look for pieces with character, with forks, burls, knobs, and knots, which create beautiful aberrations in the finished product. Logs from maple, pecan, walnut, and hackberry are milled, then air-dried in stacks and cured in a large-scale kiln until fine boards with unique details emerge, perfect for statement furniture. They’ve since changed their company name to Atlantic Fine Woods.

“Now, our clientele is primarily woodworkers,” says Laura. “Some customers and designers come in with their carpenters to pick slabs, and we’ll show them around our warehouse and find a piece of wood that will work for their project. But as our profile is rising, we’ve been doing more ourselves.” That includes crafting a signature table, countertops, and shelving. A slab for a coffee table can range from $250 to $5,000, with ebony on the high end. Laura also maintains a studio at the woodshop where she creates functional decor from the waste pieces (small planters, candle holders).

Atlantic Fine Woods still maintains a stock of exotic woods, but the Sissokos have a new plan for importing products from the Central African Republic: “We want to start doing the milling and processing there,” says Joe. “That way we’d leave more work and more jobs in that country.”

This article appears in our Spring 2020 issue of Atlanta Magazine’s HOME.

Mortgage Rates Reach Record Lows – Is Now The Right Time To Buy A House?

FORBES: By Jeff Rose

There’s been a lot of analysis and debate on exactly where the stock market is headed in the post-COVID-19 environment. But much less attention has been focused on the housing market. Or more precisely, on whether now is the right time to buy a house.

Successful lawyer giving consultation to family couple about buying house
GETTY

On the plus side, house prices have held steady and even increased slightly in the face of the economic shutdown that followed the pandemic. And interest rates are near all-time lows and could potentially go lower still.

But on the negative side, employment – though recovering since May – remains a question mark. And with housing inventory remaining tight with tens of thousands of homes having been withdrawn from the market during the shutdown, prices may go even higher, lowering affordability.

Is now the right time to buy a home? Let’s consider both possibilities.

The Case for Buying Now

Prices are Continuing to Rise

Most Popular In: Personal Finance

Any thoughts of bargain-hunting in the aftermath of the coronavirus shutdown have proven to be a losing strategy. While it seemed likely that house prices would decline due to lack of sales activity, the opposite has occurred.

According to recent statistics issued by Realtor.com, median listing prices are 5.6% higher than one year ago, and more than a full percentage point above the levels just before the COVID pandemic shut down the economy.

PROMOTED

“Housing prices have risen steadily over the past two decades,” stresses Michael Frick, President of Avalon Capital Advisors. “On average, housing prices nationwide have doubled since December 2000 according to Freddie Mac. Some people think they should wait to buy until home prices go back down; however, it is nearly impossible to time pricing in the housing market in order to buy at the bottom of the market trend.”  

With the economy opening up since May, it’s likely any delay in purchasing a home will result in paying a higher price.

It’s Easier to Sell Your Current House than Ever

Having a house to sell is a common complication when looking to buy a new home. But if you’re looking to trade-up or make a move to a new location, it may be easier to sell your current home than at any time in recent memory. 

Since so many sellers either removed their properties from the market as the pandemic unfolded, or chose not to list them at all. It’s made inventory is tight in many markets. That not only makes it possible you’ll get a higher price on the sale of your current home, but also that you’ll sell it quickly.

For example, a couple I know who are in the early 50s wanted to relocate from Florida to the Nashville area to be closer to family. They contemplated waiting for things to settle down with the coronavirus but decided to go forward anyway. A relocation program through his employer required only that they get an offer on the current home, and the company would handle all the details. They got an offer on their Florida home within just a few weeks, then luckily found a home in the Nashville area at the same time.

But as tight as inventory is, that strategy can also backfire.

A young couple I know of similarly wanted to move closer to family. They couldn’t find a house in the area they were looking to move into, but they did find a lot they felt they could build on. Fearing it would take a long time to sell their current home, they put it on the market months before the new house would be completed.

The house sold within one week. Since the new home wasn’t ready, they had to move in with the wife’s parents until it was.

And in the strange way life often works, the couple who bought their house was in a very similar situation. It was an older couple who were forced to rent an apartment because their previous home sold much more quickly than expected.

The lack of inventory means existing homeowners are unlikely to face many obstacles in selling their current homes to buy new ones.

Mortgage Rates are Near All-time Lows 

Buying now will give you an opportunity to lock-in the lowest mortgage rates in history. According to Freddie Mac, the rate is 3.13% on a 30-year fixed-rate mortgage, and 2.59% on a 15-year mortgage. (Both numbers are as of June 25.)

For comparison, the rate on a 30-year fixed rate mortgage was 3.72% on January 2. That kind of decline results in a significant drop in your monthly payment.

For example, a 30-year fixed rate mortgage for $300,000 at 3.72% gives a monthly payment of $1,384. But the same loan with an interest rate of 3.12% falls $1,284, saving you a full $100 per month.

“With interest rates at the lowest level in decades, if you’re in the market for a home, now is a good time to buy,” advises Barbara Friedberg, MBA at Robo-Avisor Pros. “Just remember to lock in the low rates with a fixed rate mortgage. You’ll find mortgage brokers attempting to sell you a variable rate – but stick with fixed to lock in the low rates. Also, depending upon the competitiveness of the real estate market in your region, you may be able to negotiate a lower price.” 

Though it’s possible mortgage rates can fall even lower from here, there’s no way to know that will happen. But what we do know for certain is that interest rates are better now than they’ve ever been, making buying now more compelling than ever.

The Coronavirus Shutdown Didn’t Kill the Housing Market

When the coronavirus first began making the news in February and March there were dire predictions of the impact it would have on the housing market. Speculation abounded that both sales and prices would collapse in the face of a crushing recession and the uncertainty it would bring.

But we’re now in the middle of 2020, and not only is the housing market showing signs of a recovery, but a strong one at that.

The fact that the housing market successfully weathered the coronavirus and the shutdown that followed are a strong indication of positive price action going forward.

The Case for Not Buying Now

Current Housing Strength May be Temporary

It’s often difficult to see radical changes in the course of any market, especially one that’s moving convincingly in one direction. But it’s possible the housing recovery from the shutdown may be temporary.

One contributing factor in recent weeks may be pent-up demand from the shutdown itself. Many thousands of homes were removed from the market, and buying activity plummeted. But the decline in sales lasted only about three months. If there is pent-up demand it’s probably very limited.

Low interest rates have also been a contributing factor, but as we know from history, they can prove fickle. An increase of 50 basis points or so can change the whole dynamic of the housing market.

But perhaps the biggest catalyst of all in the housing recovery has been one that has a predictable end. That’s the $3 trillion or so pumped into the economy by the federal government. This has largely been done through the Paycheck Protection Program, the $1,200 stimulus checks back in March, and a $600 per week federal unemployment program. All have either expired or are set to do so in the coming weeks. The impact of the disappearance of those stimulus programs on the housing program has yet to be seen.

“At least by certain measures, there has been a “V”-shaped recovery in home sales, as well as amazing resiliency in the apartment market, but what happens after the music stops?” asks Forbes Contributor, Brad Hunter. “It’s not clear whether the supplementary unemployment payments are going to get extended, or whether they will be reduced, but there will be a time when that program, along with the other measures listed above will get phased out. Nobody can forecast the timing and magnitudes with confidence, but it certainly is a good time to start thinking ahead about the likely impacts.”

The Economy is in a Recession of Unknown Duration

The US is officially in a recession, and by all accounts it’s a very unusual one. We went from a record stock market and record low unemployment in February, into a deep recession in a matter of weeks. Entire industries – airlines, travel companies, retail, restaurants, and many others – took swift and severe hits. Bankruptcy filings by major companies have become regular events. And even state and local governments are looking at budget crises brought on by sharp declines in tax revenues.

The combination is making the likelihood of the much predicted “V” shaped recovery no better than educated guess.

Because of the unique nature of this recession, it’s not known how severe it will be or how long it will last. And while buying a home late in a recession has often proven to be a winning strategy, buying too early often means buying at the price peak of the previous boom. Only time will tell.

As Goes Employment, So Goes the Housing Market – At Least Historically

Despite low interest rates, activity in the housing market has always been closely associated with employment. As we’ve seen in recent years, low rates of unemployment coincide with brisk housing sales activity and rising price levels. But the last recession, which featured double-digit unemployment, not only caused home sales to slow, but also prices to crater.

It’s been estimated that as many as 47 million people went through a period of unemployment since the coronavirus pandemic shutdown began. But while many have been called back to work since the economy began reopening in May, more than 20 million remain unemployed.

More recent figures are showing new unemployment claims are averaging about 1.5 million per week. Given that the economy began reopening in May, continued job losses since may be hinting at a more permanent situation. Put another way, the newly unemployed aren’t being let go because of a mandated shutdown, but more likely due to employer distress. 

Unless the number of new unemployment claims improves dramatically, it could have negative implications for the housing market.

Low Inventory

If low housing inventory is a benefit to property sellers, it’s a definite disadvantage for those looking to buy. Low inventory will obviously limit your ability to find your dream home.

“One issue buyers will face in these markets is inventory constraints,” observes Forbes Contributor, Ellen Paris. “Consider the number of new homes for sale was down 45 percent year-over-year in April. Sellers will continue to hold off on listing their homes given pricing challenges.”

“Low inventory continues to be an issue right now,” cautions Franklin, Tennessee, real estate agent, Matt Bogosian, “The buyers are out there but there just aren’t enough homes for them to choose from. Therefore, prices are going to continue to rise for the foreseeable future until we see more listings hit the market. I would advise you to buy if you can find the right home.”

At least until the housing market reaches some level of equilibrium, buying a home now may be presenting a double-edged sword of limited choice and inflated prices.

Some Housing Markets May Become Less Desirable Post-Coronavirus

The housing market may see something of a changing of the guard in the coming months and years due to the coronavirus. Metropolitan areas like New York City, San Francisco, and Boston, which experienced sharp price increases due to heavy demand prior to the virus, are now seen as less likely to recover. This is due to high population density, and the greater vulnerability it presents in the face of pandemics.

Conversely, second-tier cities, like Salt Lake City, Boise, Idaho, and Durham, North Carolina, seem poised for faster recoveries. The reason is lower population density, in combination with advances in technology that make remote work more possible and desirable than ever.

The widespread use of systems like Zoom, Skype and Microsoft Teams have enabled workers to connect nationwide, with far less dependence on corporate office space. These technologies aren’t new, but the coronavirus has forced them to prominence along with home-basing of millions of workers. And if millions of workers can now work remotely, they may also abandon higher costs areas in favor of less expensive environments.

The shift toward lower density, second-tier cities, and away from the high-priced coastal giants, may create an uneven housing recovery. If you’re living in one of the metropolitan areas likely to experience a decline, you may want to avoid buying that next home.

Final Thoughts

We’ve analyzed the post-COVID homebuying decision primarily based on financial and economic factors. But the decision to buy a home is often driven by a need or desire more than anything else. That will of course vary by each individual considering whether or not to buy.

Overall, if you find the right house and it fits neatly within your budget, it’s best to buy now. When it comes to making major financial decisions, we engage in a lot of speculation about what the future holds. While that might be a natural reaction to uncertainty, we can never know for sure how things will play out. 

Sometimes it’s better to just work with what you know now than to wait on an unknown future.

Follow me on Twitter or LinkedIn. Check out my website or some of my other work hereJeff Rose