Monthly Archives: August 2017

Sound of the Market’s One Hand Clapping?


Wow, time flies!   Congratulations everyone, we’ve officially made it past the halfway point of the 2017 market. Let’s take a moment to check-in and initiate a quick, mid-year update on the state of real estate in Santa Cruz County.

Let’s imagine we’ve all been given the special power to become bugs on the walls of all the open houses that will be happening out there this weekend. That way, we can secretly listen in to what people are saying about the market.

If the bug analogy doesn’t work for you, let’s pretend that the internet of things has given us a special eavesdropping device that uses those newfangled NEST home network systems to hack into the ambient noises of the marketplace.

What kinds of things can we expect to hear on the street and in the privacy of those homes this weekend?

The first sounds we’ll hear are the resounding echoes of Tuesday’s article in the Sentinel. A bold-font piece announcing Santa Cruz County’s new all-time median price high. The trailing data just arrived and the midpoint of all single family homes sales in May rose to a whopiing  $870,000 –  $40k  higher than the median we logged in April.

But wait… there’s another noise that’s ratcheting up the decibel levels. Those are bells and whistles accompanying the average price data for the month of May. That number was a wildly unexpected and unprecedented $982,670!  Maestro, cue the fireworks.

And yes,  there’s a loud gasp coming from folks who never imagined they’d be able to say they live in a place where the average home price is almost a million dollars!  While some of the jubilation is dulled by audible groans from old-timers who aren’t happy about the way Santa Cruz is changing and who worry that their kids will never be able to afford to live here. (And who incidentally don’t think they’ll ever move from their current home.)

All modulated of course by excessive lip-licking on the part of those planning to put their homes on the market in the near future.  Who are certain they’ve timed the market perfectly.  Not to mention the contented sighs of home hobbyists who keep mental calculators handy to compute their equity each time median and average prices change. (Somehow the future feels better when your house is earning the equivalent of free airline miles each month).

Meanwhile, there’s a low rumbling noise in the distance that’s getting louder by the minute. That’s all the grumbling resonating around the City Council’s recent public input session about our housing crisis.  And if you can pick out a few high-pitched shouts above the din, those are rants coming from people getting out their frustrations on the public Facebook forum about local rents.  And that constant murmur weaving through it all?  That’s the ongoing discussion about limiting Air B&B’s and other short term rentals due to the impacts that these kinds of properties have on housing costs and local rents.

Just one more thing,  although I’m guessing you’ve probably already heard enough by now… that’s the sound of the secret whispers coming from Sellers who are a little surprised by the way the market is behaving.  Their refrain goes something like this:  “Where are all the Buyers? It’s been a week and I thought we’d have multiple-offers by now?”

Reverse Mortgages: How Do They Fit Into the Puzzle?

Part Four of Four


This is it.  My last column about  “reverse mortgages.” At least for awhile. They’re  one of those things most people love to hate even though they don’t really know much about them.  I’m not even sure why I’m even talking about them since they don’t have much to do with helping people Buy and Sell homes.  

But  they can make a huge difference when it comes to helping some people to stay in their homes while enjoying much happier, healthier and longer lives.  So stay with me on this. You might not think it’s important right now,  but the whole point of these columns is to introduce relevant info you might need in the future.

The long, wandering ramble I’ve been on the last few years has been my attempt to give voice to the things I see and hear out there in the real estate trenches everyday. The things so many people seem to be wrestling with in the privacy of their own homes at the moment.  

How does selling a house fit into the giant puzzle of retirement planning, long-term health care, estate planning, property tax and capital gains tax issues,  social security payouts, pension distribution –  not to mention just the simple, everyday questions most of us have about maintaining quality of life as we age?

The longer the discussion continues, the more convinced I am that no one past the age of 50 should even think about selling a house without learning more about all of the above.  It is all of these factors combined,  in conjunction with your largest asset and most important bastion of security (a.k.a. Home),  that create the wholeness out of the sum of the parts of our lives.

If you believe that’s true, then I’d like to posit that Reverse Mortgages are one possible tool you can use to help design the kind of flexibility your life is going to need in the future.  Here are a few ways they can help:

Social Security: Consider them as a way of delaying the start of social security benefits –  which can mean higher monthly payments later.

Delaying Pension Distribution: They might allow you to push back the age you start taking your pension distribution (which could also have tax advantages.)

Increase Cash Flow: In situations where retirement assets aren’t quite enough to make life comfortable, they can supplement your income.

Growing Line of Credit:  Reverse mortgage equity lines can grow at a compounded rate of 5% per year and provide an ongoing safety net that actually gets bigger as you age – not smaller.

Long Term Health Care:   A reverse mortgage equity line can act as a defacto long-term care hedge, specially if you can’t stomach the ongoing expense of a standard long-term care policy.

Protect Portfolio Performance:  If you rely on your portfolio for your living expenses, there’s nothing worse than selling equities during a down market cycle. Reverse mortgages can help hedge against the possibility

Buffer Cash Reserves:  Every financial plan on the planet calls for a reasonable amount of cash reserves as an emergency buffer.  Reverse mortgages can help maintain a comfortable level.

Homeownership: Best of all,  in cases where people have no choice but to sell their home to get to their equity,  reverse mortgages do offer a choice to consider that may keep them in their home.


Reverse Mortgages: Can the Fonz Make Them Cool?

Part Three of a Four Part Series


Week three. Talking about something we’re not supposed to talk about in polite real estate circles. Something ‘The Fonz’ (Henry Winkler) talked about for years as a celebrity spokesperson. It goes without saying: If  Fonzie can’t make this cool, I don’t stand a chance. But here goes…more on Reverse Mortgages.

Why do so many people hate reverse mortgages even though most have very little knowledge about the details? Last week we covered the common complaints. The ones you’re likely to read when you google Reverse Mortgages.

We also noted the biggest challenge and the greatest opportunity the future holds for reverse mortgages: The world is getting older. More people are living into their 80s and 90s.  And a huge swath of aging baby-boomers is coming up behind them.  As the population ages, the big question for more and more people is:  “Can we afford to grow old?”  Traditional notions about how much is enough are changing. People are looking for better answers.  

Of course, members of the Silent Generation and Greatest Generations (born before 1946) have very different world-views from their kids (born between 1946 and 1964.)   At the risk of gross exaggeration and blatant stereotyping.. most people who grew up during the hardships and uncertainty of the Depression and WW2 see the future security mostly in terms of eliminating debt and staying self-reliant. Avoid situations where others can exercise control. Don’t owe anything to anyone. Pay off the mortgage. Live frugally on a fixed income.

(One of the hallmarks of aging is the increasing need most of us have to control our immediate surroundings and everyday lives. Precisely because things feel more out of control as the realities of age unfold.)

Younger, but still getting older, baby-boomers who grew up during the longest period of economic expansion the planet has ever seen, share the same illusion that control over the vagaries of life is possible, but they tend to grok the notion of future security in decidedly different ways.

We all know someone grappling with a version of the following:  

Mom and Dad paid off their mortgage. They have a modest retirement nest egg. Social security. Small pension. Medicare. But what happens as they age? Knees start to go. Stairs get harder. Frequent health challenges arise. Kids and grandkids are scattered across the country.  Life continues to happen and that small, perfect world they envisioned at 65 is suddenly challenged in ways they never really could have imagined back then.

As more boomers watch more of their elderly parents struggle and have a chance  really see what life planning at 65 really looks like twenty or thirty years down the road they are reframing their notions about the future:  Instead of using the assumption that once everything is paid off and a little nest egg of security and comfort is locked in, nothing is ever going to change,  planning for an extended future should be based on the knowledge that things will certainly change.  In ways we don’t expect and cannot know ahead of time.  And the best way to retain as much control as possible is to create options that  adjust to whatever challenges life decides to dish out.

So cue the notion of reverse mortgages. Next week we’ll look at some of the ways they can help you stay flexible and better prepared to meet the changes ahead.


Reverse Mortgages and The Generation Gap

Part Two of Four


Continuing the discussion…on a tricky subject known to have a somewhat dubious reputation out there in real estate land.  A  “Voldemort” kind of topic in the minds of many.  One that must not be named!   Or considered. Or even talked about out in the open.

 But guess what.… we’re talking about Reverse Mortgages anyway and rather than rejecting them out of hand let’s see if everyone can relax into the discussion a little bit.  I’m not trying to talk anyone into anything. (Reverse mortgages mostly offer ways older homeowners can stay in their homes rather than sell them so there’s no selfish reason why a Realtor would be promoting them.)

That’s a job for an impressive array of celebrity spokespeople that the reverse mortgage industry has trotted out over the years.  Hallmark Heartthrobs Robert Wagner, Tom Selleck and Henry Winkler have all tried to rehabilitate the image of Reverse Mortgages at one time or another.  Which begs the question:  What could be so wrong with Reverse Mortgages that even The Fonz himself couldn’t make them seem cool?

Here’s a list of the common complaints about them, along with a few of my own editorial comments:

Too Much Temptation:  Goes something like this… no sooner do those old timers get their hands on a chunk of cash than they suddenly want to go hog wild and start to live a little. You know, Geezer Spending Sprees on round-the-world cruises or wild bus junkets to Chukchansi Casino!  * Obviously reasonable discipline is required with all forms of financial planning.

Family Issues:  What happens when the kids are already counting on inheriting the home free and clear (on a stepped up basis?)  Aren’t entitled kids entitled to the keys to the house with no strings attached? More aging boomers are coming to the conclusion that they shouldn’t sacrifice their own quality of life for the next 30 years just to pad their millennial kids’ expectations.

Worries About Spouses: What about Dad’s new younger wife?  Will they keep her off the loan and off title to the property too? What happens when Dad dies? Is she out in the cold?  Relax, new protections for surviving spouses have been written into the loan regs.

Who is on Title?:  It is simply not true that the lender receives title to the property.  No one quite knows where that false notion came from. (Probably a disappointed kid who didn’t get the inheritance they were expecting.)  Fake News!

Desperate Borrowers = Foreclosures:  If people who borrow the reverse mortgage money can’t pay their property taxes and insurance, then they will lose the property to foreclosure… Well yes, but if they can’t pay their property taxes in the first place they are going to lose their properties anyway.

High Upfront Costs  Costs have come significantly down on Reverse Mortgage Products. They can be paid upfront, wrapped into the loan or paid on the back end.  Borrowing money costs money. No way around that. Check what that last refi cost you.

Generational Aversion to Debt:  Now we’re getting down to the real issue behind the image problem of reverse mortgages.  My sense is that there is a growing generation “gap” between how aging baby-boomers and their greatest and silent generation parents view the issue of debt and what financial freedom and control really mean.  

We’ll talk more about that next week.


That Which Shall Not Be Named


Ready for today’s topic?  It doesn’t take a mind-reader to know how most of you will respond when I tell you what it is. Some of you will say:  “ Wait, I thought they were bad?”  Others:  “Thanks, but no thanks”.  And still others:  “Not on your life! I wouldn’t touch one if my life depended on it!!”

Our topic du jour is Reverse Mortgages.  And  even if some of you don’t want to hear about them because you think you already know all there is to know about them or you have it on good authority that they are a huge rip-off,  maybe  it’s time to revisit the subject again.

Let’s paint the big picture. Today more than 10,000 people in the US will turn 65.  They’ll  join millions of other aging baby-boomers out there who are wrestling with the complex and confusing questions that are part of planning for the last third of their lives. In retirement and old age. In sickness and in health.

Since generations are living so much longer these days, aging-boomers are finding themselves blessed (and cursed) with lots more opportunities to care for their aging parents and observe first-hand, the challenges of  living into one’s 80s and 90s.  Many of those experiences are poignant. Life-affirming and thought-provoking.

And a powerful reminder that it’s incumbent upon each of us to do the best we can to envision our own lives at 80 or 90. Caring for parents should be considered one of the last great teachings we receive from them.

Just a friendly reminder: We all exist somewhere along the great continuum of life. We are all headed towards the same place, sooner or later.   It’s common to hear people say:  “I don’t want to be a burden to my children.” At the same time it is disconcerting to hear how little in retirement savings, the average American has stashed away.

Which begs the question: Can we really afford to grow old these days?  Are we as a culture wisely preparing to finance our own longevity?  Which in turn brings us back to a more mindful consideration of any topic that has the potential to promote better quality of life in the years ahead.  Including Reverse Mortgages.

What are Reverse Mortgages?  In simple terms they are federally-insured loans for qualified people over the age of 62, that allow homeowners to access some of the equity in their primary residences without having to make monthly mortgage payments  until they die, sell the house or move out of it.  At first glance, sounds too good to be true doesn’t it? Way better than an equity line. If you can even get one of those these days.

But since everything in life has a price – most assuredly money – we’ll remind ourselves that unlike conventional mortgages where the loan balance is paid down in regular monthly installments, it’s the opposite with Reverse Mortgages: The size of the loan increases as deferred interest payments are added on to the principal amount over the life of the loan.  It all gets paid at the end.

Hmm. Now that’s a trickier proposition. There are reasons why Reverse Mortgages developed such a bad rep early-on in their history.  Just as there are reasons why more and more solid financial planners are beginning to view  them as a valuable long-term planning tools for aging-retirees.  We’ll explore more next week.