Case Shiller is not a new type of luggage

One of the few people who called the housing boom correctly is Robert Shiller, an economist at Yale University. In his 2000 book, Irrational Exuberance, he warned against the run-up in home prices. His work is prescient in forecasting the housing boom and warning against the excesses of lose lending regulations, etc. Yet, in the peak of boom, Shiller was regarded as a pariah. Who want to hear about the buzz kill during the boom! His was clearly the minority options. People just didn’t want to hear the bad news! Instead, they blindly proceeded ahead.

The Case-Shiller Home Price Index is now belatedly accepted as the standard for the real estate industry. Your best resource for information on housing trends is Case Shiller.

Just imagine for a moment if you’d taken Shiller’s advice seriously. Imagine that you disinvested all your real estate at the top of the market in 2006-2007 and now had cash to be bargain hunting at the bottom of the market, as what is potentially a long, slow rebound commences? What would you look to buy?

One thing will always remain true, no matter the overall state of the housing market: homes that share basic, sound characteristics will be valued higher than homes without them. What are some of these characteristics? The classic one is location, but there are others like condition, configuration (number of rooms/types of rooms/size of rooms), and finally there is finish – the quality and “style” of the home.

In a market full of distressed properties, BuildSmart helps home buyers to identify valuable properties – valuable now, and ones that will maintain their value over time. Our background in architecture and contracting give us unique insight on our client's behalf to create a home solution that fits their needs, and holds its own, even in a turbulent marketplace.

If you're a home buyer, contact us today to experience our value-based real estate solutions for your next home purchase.

Real estate behaves just like any other market

One of the startling thinks about the real estate boom were the number and variety of sources proclaiming the soundness of the real estate market.

Once this positive feedback loop starts, it takes on a life of its own and quickly, we are not responding to the underlying market but just participating in the feedback loop.

To see how this happens, look back to the boom and see:

Marginal buyers buy houses > Demand increases
Demand increases > More houses get built >
More houses get built > The stock of the public builders rises

This story inevitably gets reported as “Huge demand fuels builder stock bonanza!” and confirms everyone’s assumption about the health of the housing market. Without understanding the story behind the headline, you’ll just be participating in this feedback loop and not making good decisions, etc.

Remarkably, the housing boom obscured almost everyone’s perspective, sure, home buyers and small investors got caught up in the euphoria, you’d expect that but large, sophisticated investors that should have known better also got caught up in the hysteria.

The housing crisis explained

Reading the statistics about housing’s collapse, it’s hard to imagine how we all got here, but here we are. While it’s tempting to lay the blame at greedy mortgage brokers, ill-informed home buyers, crooked appraisers, etc. The fact remains, there is enough blame to go around. Seeing the extend of the demand for housing people and companies stepped into the breach to offer new, more exotic home loans, looser qualifying, etc. The “how” of this all came about is now clear to see, the “why” it came about is will be debated endlessly.

We believe that one reason we became over-invested in housing has historical antecedents. What’s interesting about our current malaise about housing, is how much of it can be laid at the feet of the first great housing crisis in America during the great depression. Surprisingly, until that time, most people rented homes. Because of steep down payment requirements, most people simply did not have the cash required to afford a down payment. That meant that those who participated in the market were actually financially capable of participation. If you didn't have enough money saved for a down payment, you simply couldn't buy.

We faced this same scenario as a prelude to the current crisis: people wanted to buy homes, but really, their incomes couldn't afford it. So what did the industry do? Created an entire marketplace based on sub-prime credit levels. Now everyone could afford to play. In a world where housing prices only go up, this is a beautiful thing. But as we learned, housing prices actually fall now and then. And sometimes, when the foundation is poor enough - they collapse.

The value of repairing

According to an article released by Realtor.com, you will be more likely to get the best value from handling repairs than any other renovation. Why does this make sense? You only have to consider the negative impact on a buyer's perception that a home in a state of dis-repair can have.

If a potential buyer is walking through your home and sees damaged tiles in the bathroom, stains on the ceiling from a leaky roof, or windows that don't open properly, they are likely to look elsewhere or are considering how much below asking price they may put their offer in at. After all - someone has to put the house in order.

At BuildSmart, we'll help you focus on renovations that create value - and all while saving you money on the process. By turning owners into builders, we are committed to helping you get the most out of every renovation dollar spent. At BuildSmart, we help you turn the obvious repairs that a home might need into renovations that attain the big-picture goal - increasing your home's value.

Contact us today to learn more about how we can help you.

Housing 2.0, a revolutionary way forward

When the American militia fought the English during the revolutionary war, they faced overwhelming odds. There were three better trained, better equipped English soldiers for every American soldier. The American troops prevailed by fighting the war on their on their own terms. They relied on stealth and strategy, only engaging the British when they knew they had the advantage.

So, how does that relate to us? BuildSmart believes the best way forward in this new era of home ownership is to behave more like the American Militia than the British Troops.

• Know your territory better than anyone else
• Use strategy and cunning to help you succeed 
• Embrace your inner pioneer and don’t be afraid to do it yourself

The problem with the housing market is the problem with the housing market.

It’s hard to even talk about the housing market without sounding like a cliché.

• Approximately $1.5 Trillion of wealth lost
• Approximately 2.5 Million foreclosures
• Approximately 25% percent of all homes underwater

The extent of this problem is staggering; ask yourself, have you, your family or friends been affected by the housing downturn? Did you lose your house to a foreclosure of short sale, are your adults kids now living with you because they can’t afford a home.

Obviously behind these numbers there are real people drying to dig out of their personal calamity. You probably know some of them; maybe you have your own tale of doom from the housing market. If you lost money in real estate, lost your home, had to do a short sale, etc. we're sorry to hear that, according to a Pew research poll, over 15% of American households, approximately 15 million households were negatively affected by the housing downturn. So, if you were affected by the housing downturn, you are not alone. But, here’s the thing, it’s time to get over it.

 More to come...

The small builder's dilemma

Yes, some homeowners actually are THIS upside down in their mortgages.

At BuildSmart, every day, we see first-hand how small builders find it hard, if not impossible, to compete against distressed properties. By their nature, distressed properties have a way of creating a new low (floor) price for a neighbor. Since the sellers are now banks just trying to liquidate them, it doesn’t matter what people paid for the properties, they just want them gone. These sales are corrosive.

Small builders don’t have this luxury and instead need to sell their homes at a profit just to stay in business. Many of these builders have now left the market either permanently or temporarily.

Why start a new housing project and take all that risk if there is no guarantee  you can make a profit?

While there is obviously a lot of pain in the real estate industry, there are also a lot of opportunities for the buyer and small investor. These opportunities are primarily in undervalued or distressed properties.

Since many of these properties have either structural issues or cosmetic issues, this approach, which we call BuildSmart walks you through the process of and identifies these issues of improving distressed properties in order to come out on top in your investment.

More to come on this exciting topic...