Fortune Telling The Naples News
August 14, 2019
Why Location Location Location
Is no longer the rule
I bet you never thought that rule would change. Up until now it has been 101 rule of buying real estate. But through the years we have had generations that have changed our lives significantly. Think about your grandfather’s generation, the Baby Boomer of the Industrial Age. They mass produced cars, creating an industry that employed hundreds of thousands, raised household incomes by introducing the concept of Unions and each household quickly went from 1 car per family in 1970 to 2 or more cars per family by 1980’s.
Then came Generation X, now turning 50 years old and we not only have a TV in every room of our home, we have 3 smart devices per person in our home!
Those are just one macro examples per era of how our lives where drastically changed by each generation.
Today we hear so much about how Millennial's contribution is making an impact on our lives. But the topic of Real Estate is right smack dab in the middle of reform, as I write this. This generation has grown up differently than the past 2 generations. This group has never had to share a bedroom or bathroom with their parents. Their dishwashers washed and dried their dishes. The central air conditioning kept the home at the ideal comfortable temperature.
Their closet organizer, separated their dozen shoes and organized their electronics. They grew up with 42” upper kitchen cabinets, crown mountings and granite counters. No kitchen would be complete without designer appliances and built-in microwaves. This group has never had to vacuum the carpeted kitchen floor or go to a laundromat to wash their clothes.
This is not a knock on Millennial's, there is nothing wrong with their modern homes. Each generation grew up in a more comfortable home than the generation before them. This became the Millennial's benchmark and standard of living. Just like the phenomenon of Millennial's not wanting to obtain a drivers license or have a desire to drive, nor do they have the desire to buy an old fixer upper house.
Why? You ask.
Well because their norm was to be driven to school, not walk or ride the bus. The internet and constant tv, told parents that those two choices were unsafe. That wasn’t the Millennial's fault but it was their reality to been driven everywhere they wanted to go. I first recognized this when my two daughters born in 1990 and 1993, had a slew of friends that had no desire to get a drivers license. They declared it was just fine to be driven, rather than take on the responsibility or cost of a car. Besides it was easier to Text, chat or watch a video from the backseat.
Now this generation is around 30 years old, give or take, and they are evaluating their housing. Sure up until now they have been in college for their bachelors degree, masters degree and PhD. As any one of them will tell you, their professors told them on day one, they would never get a job without a masters or PhD. Plus there was no need to work because the student loans covered all their living and spending needs.
Living needs, you ask?
Yes, you see at most of the universities in our country, the dorms have aged to deterioration. The schools knock them down to make more room for classrooms to fit more students. Housing has now gone private and developers have built all new “Apartments” not dorms. You remember a dorm, don’t you? A room with bunk beds and a shared bathroom for everyone on your hall, right?
Well that’s not going to work. The reason is not the Millennial, but their parent. Yes, the generation x Parent. They expect better for their child and they are willing to pay for it. Peer pressure causes the students who parents can’t pay for these state of the art apartments, to get expensive student loans. Now if you haven’t seen these new university apartments, boy you are going to be shocked!
They are usually 2 bedroom (one for each student) each coming with its own full bath, raised vanity and granite counter. All modern wood floors, 42” upper designer cabinets, top of the line appliances and a personal laundry room with private washer and dryer. Now hang in there, it gets better! They also come with built in pools, spa, game room, a full modern gym, electric scooters and computer business center as well as a social hall complete with cafe.
So imagine yourself as a Millennial that grew up in a beautiful suburban comfy home, chauffeured everywhere to the age of 18. Then lives in a state of the art modern Apartment with every luxury from age 18-26 at an expense they have never had to earn, as the funds to afford that lifestyle were either borrowed or supplied by a parent.
Pretty cool life right? Is there anything wrong with that? Well no. Nothing. This is the reality of this generation. It’s what our grandparents and parents wanted for their children, a better life.
So why does this change the # 1 rule of real estate, Location Location Location?
Because that phrase has been what has driven our real estate market around the world. The home near the ocean, the lake, the city center, the park, the mountains, the view or the convenience. These are the reasons why the same homes decade after decade get remodeled and updated and continue to go up and up in value. Until now.
Now, the Millennial doesn’t value any of the above described “values” or perceived value. No, you ask? For many reasons. Think about what we just discussed above. Millennials are mobile, they work from home or an airplane or on a lap top a Starbucks. They are more introvert and want privacy in their own room or space. They are use to seclusion of their headphones or earbuds. They expect those high end finishes in a home as it’s their minimum standard.
They never learned to change out a toilet or sand the old doors down to re-stain them. They never pushed a lawn mower, shoveled snow or know how to change a tire. Their biggest decision in looking for somewhere to live is whether there is a gym attached or if not is there room for my Peloton? (Cool Stationary bike)
They are never going to remodel a home or fix one up because it’s in a cool location. They could care less if their home is 10 miles out of town, as long as Uber is available. They don’t care about the view, they close the blinds and stare at iPhones. Their children will never play in the yard, it’s not “safe”. They will have play dates at a strip mall play park or spray park.
What about their pets, you ask? Millennials love pets! They have two dogs! Or more. They take them to the dog parks or camp bow wow for day care.
You see the Millennials can afford $30-$40 a day per pet because they don’t have a car payment or car insurance or homeowners insurance or property taxes, yard costs or home improvement costs.
This all seems different and strange to anyone over 50, but it’s not at all. It’s how they were raised.
Now you might be thinking, not every Millennial lives like this. Well you would be right. You see there are rich millennials and poor millennials. The rich ones are inheriting from grandma and grandpa. I have sold homes to dozens of 28-35 year olds that paid cash for their $350-$600k home. There was no way their parents were going to let their children pay interest or not have a “maintenance free” home. Aka granite counters and new stainless appliances. The poor millennials are ok with renting forever. They can get all the modern comforts they are use to with no maintenance cost.
These luxury new condos and homes have to be built for this generation and since the best perceived Locations already have older homes, the developers must go further out to build. With Uber readily available and the economy growing by leaps and bounds, the infrastructure to support new development is the perfect situation for this group. New Whole Foods groceries that deliver and dog parks are popping up everywhere.
So if your wondering why your home in it’s amazing location is not appreciating at the pace you like, just look around at new development 10 miles from your location. They are selling like hot cakes and your neighbors are lowering their prices.
What can you do?
Well I keep repeating this over and over and my Sellers rarely listen. If you have a home or condo in an amazing location, you should take a drive out to a new community and see what the builders and decorators are doing to sell those homes. You must spend the money and time to make sure your home has brand new modern flooring, cabinets, appliances, security, technology and maintenance free yards.
Don’t tell your realtor that you put in a new hot water tank 4 years ago and painted the bathroom. Or changed one fixture and your willing to negotiate when you get an offer. Your NOT going to get an offer, no matter what you price your home at.
Here is an example as proof. I had 4 listings this year during my busiest season. All where 5-9 year old “newer homes” had swimming pools, lightly used as 2nd homes and were being sold completely furnished. We had them priced in the middle of the pack. Within a month or two, we lowered each one to be the least expensive home offered in their respective communities within our town. However not one of them sold. In spite of each getting 20-40 showings of perspective buyers.
The feedback I would receive from the potential buyers and their agents was always “Buyer decided to build new” New? I would say sarcastically! This home is only 5 years old, barely used, has all the window blinds installed, tv’s hanging, ceiling fans installed and tons of expensive furniture.
The response was the same time and time again. “But it’s not in style anymore.” The colors are out, the furniture is out of date, the TVs are outdated, too much maintenance ect...
If you think that sounds absurd, you are probably over 50 years old! Lol
So the next time you want to know what your home is worth, don’t expect your location to be a factor anymore. My advise is to enjoy your location because you love it, but when it comes to selling your home you must be prepared to make it look like a builders new offering, because that is what your buyer can buy for the same amount of money and they don’t care how far they have to commute to get brand new. Location is only in the eyes of the beholder now a days.
April 23, 2019
If you have been following the Collier County Commissioner debacle, then you know that they voted mysteriously out of no where earlier in April, to enforce a no short term real estate rental policy, that would have devastated our rental industry. Our Board of Realtors here in Naples, banned together and we wrote compelling letters and appeared at their meetings, asking them to reconsider.
Well today they back peddled and put a hold on that policy. While this topic is not over, we hope they really take a look at how it would effect many lives and businesses in Collier county. I promise to keep you informed if anything changes. But for now, we dodged a bullet!