Decisions, Decisions, Decisions

By: Victor Normand

Buying or selling a home is a big decision for most of us. Some people labor over the decision, some not so much. As an objective observer and professional real estate Agent hired to assist in either process, this path to the end is often a long and winding road and can at times, defy logical explanation.

You would like to think that there always exists a set of rational facts that when gathered together and organized properly, lead to a logical conclusion. This should hold true whether you are making the decision or helping someone else through the decision making process. It is not always easy to gather those facts. Finding a sufficient body of knowledge surrounding any given decision is not so easy but nonetheless, we all believe that those relevant pieces of information exist.

As we move forward in the process, we often come across the eureka moment when we are sure of the right decision. Suddenly, all is clear and apparent so time to move forward, right? Or have our emotions interfered with the thought process and are we about to make an irrational choice?

Is it possible to strip away emotion so we can know what is TRULY the right thing to do? Is there someone out there, some clear thinking real estate agent strong enough to tell us if we are in fact making the wrong decision because of our emotional state?

If you struggle to strip away emotion from the process, you are likely to be struggling for a long time and not getting any closer to knowing the right course of action. Emotions by definition, are powerful feelings that existed in the human brain BEFORE the ability to reason came along. Scientists have observed that reason and emotion are linked in human behavior and now believe that both functions don’t just co-exist but rather are a singular process.

Neuroscientists studying brain chemistry have found that the decision making process requires both reason and emotion to work. Now you know for certain that Dr. Spock is not of this planet, if you ever doubted that. Neuroscientist Antonio Damasio writes about a patient who underwent brain surgery to remove a tumor and lost the orbital frontal cortex which connects the rational frontal lobes with the emotional or limbic system and as a result, lost the ability to make decisions.

There is no sense trying to remove emotion from the decision making process, nor should we try less we unleash dire consequences. For clients and real estate agents alike, it’s important to recognize that the decision to buy or sell a home requires both a reasoned and emotional commitment. Even though life’s circumstance may point to a change in the size or location of a residence, it may be necessary to wait for the emotion connected to the change to catch up.

As professional real estate Agents, we commit ourselves to observing and listening to the needs and wants of clients. That process needs to include using emotional intelligence: the ability to identify and manage ones own emotions and the emotions of others. It may sound complicated, but it is after all, how we have evolved.

The Very High Cost of Housing Regulation

By: Victor Normand

We count on government to do many things like keeping us safe, protecting the environment and making sure the economy is run well. Our elected officials pass laws for the common good, then hand them over to bureaucrats who write the regulations to make the laws work. Every law in its implementation has a cost, though not always apparent for an individual regulation and eventually, those costs add up.

The National Association of Home Builders (NAHB) did add up those costs last year and determined that the cost of regulation at all levels of government accounted for almost 25% of the cost of a new home nationally. The breakdown is 14.6% of the final price to produce a finished lot and 9.7% for meeting requirements associated with actually building the house. Separately, in a 2015 study by the Pacific Research Institute, Massachusetts ranked 34th for its regulatory burden on small businesses; one being the least burdensome. So, it is safe to assume that regulation adds even more to the cost of new housing locally.

Here’s how the regulatory percentages translate into the actual cost of a new home sold in Acton in 2016:

Who can say whether all of the regulation is truly needed, but it seems that the cost benefit may not be present here. In the 1960’s, highway deaths averaged around 50,000 each year. Regulations requiring seat belts, air bags and other safety features have resulted in today’s average of around 30,000 deaths each year, one third of which are attributable to speeding. So, we could regulate speeds, not to exceed 5 or 10 miles per hour everywhere and possibly save lives, but how reasonable is it to think that we can make the world safe for everyone all the time?

And then there are regulations that are patently ridiculous. On the commercial real estate side, our new office is about 1,700 square feet. It is open concept with glass walls and doors, yet required to have no fewer than 8 fire alarm/strobe devices, any one of which could be heard or seen from anywhere in the office.

Compliance is another issue. The cost or effort to comply with building regulations places a disadvantage on smaller home construction businesses that are forced to hire outside consultants to fully comply with regulations. Most home contractors employ fewer than 10 workers and build fewer than 10 houses per year. Larger companies have compliance personnel on staff.

Because compliance is universal, the cost to comply is passed on to the consumer. This applies to renters as well because multi-family construction is impacted even more than single family housing, making the cost burden disproportionately greater on lower income individuals and households, as well as first time buyers.

So, what’s to be done? In addition to the NAHB, state and national housing associations and other trade associations do monitor new legislation and raise their voices, urging reasonable responses to safety and environmental threats. Individuals as well should make their opinions known.

It is important to make our homes safe, build them in appropriate locations, and keep their energy consumption efficient. But there are reasonable, cost effective limits to what should be required from new laws, and reviewing outdated laws and regulation is not a bad idea either. Let’s not get to the point where only the wealthy can afford new homes that are built by only the biggest home builders.

Wisdom from a Petting Zoo for the Holidays

By: Victor Normand

The merchants and businesses in West Acton Village held their annual Holiday Stroll recently to the delight of children and adults alike. There was music in the air, decorations everywhere, a scavenger hunt and a charity gift basket raffle. And of course, Santa and Mrs. Claus made a special appearance. Smiles were evident wherever you looked.

The strollers were treated to cookies and hot chocolate as they went from shop to shop, including a special holiday market opened just for the event. A small forest of decorated Christmas trees was set up at Villageworks where Santa and the Mrs. held court.

There were also animals present for the celebration, including a beautiful horse drawn carriage offering rides around the village and a little petting zoo for youngsters and us older folk with sheep and goats, a llama and a donkey. It was the donkey that made my day.  Unlike my cockapoo Edward, this donkey genuinely appreciated being petted. He just stood there motionless for as long as I was touching him. The other small animals roamed about in the enclosed area, but not my new four-legged friend. I truly felt a connection.

donkey

It was a connection that belonged to the season. My first thought in response to the undivided attention I was receiving went to imagining that this poor fellow, despite his involvement with a petting zoo, did not regularly get paid much attention, that after the day’s gig, he would be heading back to his lonely stall in a lonely barn on a lonely farm. In reality, I’m sure this creature has as happy a life as any donkey can expect to have and that he is treated very well.

By now I am feeling guilty that it took this unintended little act of kindness on my part toward this docile creature to make me realize that there are human beings in my world who could use little random acts of kindness as well.

We had a drop off station in the office for donations of food items for the Acton Food Pantry and families in need were the beneficiaries of the gift basket raffle. And in general, many of the organizations we support, pay special attention to the needy at this time of year, but the need for a gentle touch may often be much closer to home.

We should all be on the lookout for those around us, family, friends, co-workers who might be unhappy especially at this time of year when happiness might seem to be happening to everyone except them. Take a chance, show some love and kindness to everyone you come in contact with, you just might be surprised by how long they stay around for your touch.

Housing and the Silver Certificate

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Source: National Numismatic Collection at the Smithsonian Institution

When I was a boy, every once in a while, I would come across a one dollar Silver Certificate. Because they were different they did not get spent, usually. I spent my last Silver Certificate on a haircut.  It was the only money I had and I planned on keeping the next one I came across for good, which, sadly, hasn’t happened yet.

These one dollar bills looked like every other one dollar bill except for some different and additional text on the face of the bill. Instead of FEDERAL RESERVE NOTE at the very top, these bills said SILVER CERTIFICATE, and below that and above THE UNITED STATES OF AMERICA in a much smaller font was the phrase THIS CERTIFIES THAT THERE IS ON DEPOSIT IN THE TREASURY OF, and at the bottom of the bill beneath ONE DOLLAR it said IN SILVER IS PAYABLE TO THE BEARER ON DEMAND.

It was rare to come across these bills, but they did show up now and then. Being a curious lad I asked my father to confirm that someone somewhere would in fact give me silver in exchange for the bill. He said the government would, which was correct back then, though today if you show up at the Treasury the law now says that your one dollar Silver Certificate will get you a one dollar Federal Reserve Note.

My father’s explanation made sense to me; actually, it made more sense than the fact that all the rest of paper currency seemed not to have anything of value offered in exchange for it.  “So what makes every other bill in every other denomination worth anything?” I asked. My father, who was a man of the machine age, literally; he was an industrial engineer in post war America when industry was all about mechanical manufacturing. He was no economist, but he was always able to describe the world to me with precision and efficiency. “The value behind our money is our houses,” he said.

What my father was describing back then was what we most recently know as “Quantitative Easing.” In dramatic fashion, up until very recently, the Federal Reserve was printing up hundreds of billions of dollars and using them to buy mortgage backed securities. The fact that the dollar suffered no loss in value because of this is confirmation of my father’s lesson.

Moving money in and out of circulation is far more complicated than this “Quantitative Easing” exercise suggests, and our money is backed up by the entire American economy, but housing is a large and important component. For most Americans, the single largest component of their wealth is in home equity and for the economy as a whole, housing and housing services accounts for over 15% of the Gross Domestic Product. While homeownership has suffered since the Great Recession, it has been increasing lately and is still nearly 65% of all households.

So, my father was right about what makes our paper money valuable, and I was wrong to use my last Silver Certificate for a haircut. Today that certificate would be worth $139 to a collector!

Am I a Luddite?

By: Victor Normand

ludditeA recent Time Magazine article by Lisa Eadicicco and Matt Vella exposed the struggles of smart home technologies to capture consumer interest. Devices to control air conditioning, lighting, pantry and refrigerator inventories, home security and the like using internet connectivity seemed like the next big innovation. But it has not happened. Various technical reasons were cited, but mostly the failure to establish a basic rationale for having such technology in the minds of consumers seems to be the problem. It will no doubt come about in the fullness of time, but for now I find myself cheering for the consumers who just said “no thanks.”

So now I began to wonder have I reached the point in my life where new technologies need to be stopped or at least slowed down? Is there a movement out there that I should join as a modern day Luddite? The Luddites belonged to a protest movement opposed to the advancing machine age in England, early in the nineteenth century. General Ludd, as he was known, inspired the movement that saw weaving equipment smashed and factories burned in protest to jobs being lost to technology. Though Ludd himself apparently never existed, his name if not his actual cause carries on.

For some reason, the rejection of smart home technologies made me feel good. Even though I’ve known since the third grade that you cannot stop progress and most often change is good, if not inevitable. My third grade experience came to me in the form of a story told by Miss O’Leary to her class about an elderly aunt who passed up an opportunity to trade in her stocks in a Westfield buggy whip company for stock in a mostly unknown company called “International Business Machines.” Her aunt reasoned it was anyone’s guess who knew what business machines were all about, but surely there would always be a need for buggy whips!

Miss O’Leary’s story may have been apocryphal, but of the 40 buggy whip companies then in Westfield (still known today as “Whip City”) only one exists. This shows of course, that despite the decimation of an industry by technology, it is possible for the old ways to carry on, in a fashion. Nonetheless, the story obviously made an impression on me. And the truth is, the Luddites were not wholly against weaving machines. Their protest was against manufacturers who used machines in a “fraudulent and deceitful manner” to circumvent standard labor practices. They too recognized that technological change was unstoppable.

So, my rant against technology is in fact using technology to make the point. Also, it has been suggested that the ultimate intent of the Luddite movement was to make a machine to destroy other machines.  When you think about it, mashing a weaving machine is a much easier concept than attacking the “cloud,” or is it? Protest is good and technology has its place, prominent as it is, but I for one have no problem maintaining a paper grocery list.

Hominis Ambulantes

By: Victor Normand

Acton Real Estate_092814-4803I walked to the hardware store last week. For me, and I believe I am not alone, this was not an expected mode of transportation; the hardware store is 1.1 miles from the Acton Real Estate office, my point of departure. I need to get more exercise and the idea to take this walk came to me earlier in the week and actually became a bit of a compulsive event. Once I decided to do it, there was no turning back. Of course, I have taken my share of nature walks, but to forgo my car for such a trip as this during a workday was uncharacteristic and the idea could easily have been set aside.

On the appointed day I had prepared for the journey by wearing comfortable shoes and I assessed good weather conditions. I told no one of my trek ahead of time for fear that it would not be fulfilled. Out the front door I went with the simple comment “I need to run an errand.” I had previously determined that there would be sidewalks available to me throughout my mid-day walk. For the entire distance back and forth, I passed only two other pedestrians, though several young bikers did zoom past on occasion. I have to admit to feeling self-conscious. More so on my way to the store when I had the companionship of neither man nor beast, and I was emptied handed. Returning with my purchase, a trivial item of no urgency for the office, I felt comfortable with an answer to the question “What could that walking man, wearing business clothes be up to?” which I imagined every motorized passerby to be asking themselves.

The total elapsed time for both the walk and the shopping was just under one hour; which would have been twenty minutes by car. This effort helped my heart and lowered my carbon footprint, but cost me 40 minutes. To be honest, my work product for the day did not suffer.  Walking around eschewing the automobile is not practical or even possible for most of what we do these days, but it is becoming more popular and, from a real estate perspective, more desirable.

In a way, we seem to have come full circle in the relationship between housing and transportation. Until the middle of the nineteenth century when rail transportation emerged on the scene, (Acton had no less than three lines passing through town) most folks needed to live within walking distance of work and commerce. The automobile changed all that of course and we began to spread out. And indeed we did, building homes further and further away from where we worked and shopped, adding more roads and highways to accommodate the migration until we found ourselves at the practical limits of time and road capacity. So we are coming back to the rails and the “walkable” environment.

We are building houses closer together, though not necessarily any smaller, embracing infill locations and increasingly finding urban and town center locations more desirable. As it gets more and more stressful to drive anywhere (does the Sunday drive exist anymore?) I am happy to be evolving as a walking man.

Unintended Consequences

By: Victor Normand

Alternative_EnergiesRecently the Massachusetts legislature passed and the Governor signed a new energy bill H4568, “An Act to promote energy diversity.” Most of the bill had to do with expanding the Commonwealth’s efforts to encourage alternative energy sources by using offshore wind farms and hydropower to generate electricity.

The bill keeps Massachusetts ahead of most other states in the areas of energy conservation and the use of alternative/clean energy sources. It is innovative in its advocacy of off shore wind power generation, challenging in its intent to double the amount of electric power generated by clean sources, and most importantly, it is proactive in its scope as it anticipates the not-to-distant future when local utilities will no longer have the use of nuclear power plants.

The Great and General court is to be commended for bringing forth such an important piece of legislation, hailed by most conservation and clean energy organizations as a very good bill. But not everyone is pleased with the law, most notably, the Mass Energy Consumer Alliance and many State Senators, including Senate President Stan Rosenberg who favored a more expansive bill.

One of the sections that passed in the Senate and was stricken from the legislation by the conference committee and not included in the final House version of the bill would have required that every home sold in the Commonwealth have an energy rating before it could be listed for sale and an energy audit before closing. This idea, similar in principal to gas mileage ratings on automobiles, has benefit for consumers, but major pitfalls for most homeowners.

Last year nearly 50,000 homes were sold in Massachusetts. Newer homes in many communities did come with a very sophisticated energy rating, called a HERS rating (Home Energy Rating System), but that was only 6% of the market. Even though implementation of the bill could have taken years, the broad scope of the rating requirement would be overwhelming.

Implementing new laws and regulations is nothing new to the real estate industry, lead paint certifications, home inspection notifications and closing disclosures for example. It is the significant unintended consequence such a rating and audit requirement would have on owners of older homes; homes more often concentrated in lower income, urban neighborhoods that would be problematic. Especially since Massachusetts has the second oldest housing stock in the country with a median age of 54 years.

There would be a cost associated with both the energy rating and the energy audit, and a time factor to get them accomplished to be considered. The burden to implement this would fall on the home seller, who would be under no obligation to make energy improvements.  But as a practical matter, home buyers would be looking to sellers to make identified improvements or in the alternative, to discount the sale price. Even home buyers who are in the market for an older home who are prepared to live with the added cost and discomfort of a less energy efficient house would be well advised to take advantage of the situation in preparation for the day when they will find themselves in the home sellers shoes.

The Massachusetts Association of Realtors lobbied to get the energy rating section of the bill removed. Their economic and social arguments were effective this time, but the advocates will be back next year. So, it is not enough to rely on lobbying efforts alone. Those of us in the real estate business need to continue to take energy conservation seriously by making sure potential home sellers include energy saving efforts on the list of important worthwhile home improvements. The unanimous vote of the State Senate in favor of this measure in the just ended legislative session is not insignificant.

Thinking About Real Estate

By: Victor Normand

PhiladelCampaignHessianMapAn article entitled, Obama After Dark: The Precious Hours Alone appeared recently in the New York Times.  It caught my attention because I imagined that the President of the United States probably gets very little quiet time. Turns out President Obama gets his quiet time late every evening, undisturbed in his private study where he stays up late before getting his usual five hours of sleep. It’s comforting to know that Mr. Obama does take time to be alone with his thoughts.

Rahm Emanuel, Mr. Obama’s first chief of staff said in the article “You can’t block out a half-hour and try to do it during the day. It’s too much in-coming.” He talked about how the self-described “night guy” uses late nights to put aside interruptions and focus.

Carving out a large block of time to think wasn’t always that hard to do. Consider how long it used to take to travel anywhere by foot or by horse and there you have your time to think. In the beginning of his book about John Adams, David McCullough describes the journey the delegate to the First Continental Congress took in 1774 from Braintree to Philadelphia on horseback. He traveled with others and made many stops along the way during the three-week trek (it would have taken only eight and a half days straight through). But he still had plenty of time to think; he wrote in his diary “I wander alone, and ponder. I muse, I mope, I ruminate.”

Today, travel is speedy and hardly quiet, technology has seen to that. In fact not only does quiet not exist as a naturally occurring event during any part of our daily lives, but the demands we place on our weary brains during every waking hour is daunting. Even though our brains are not wired to multitask, we attempt it routinely and we expect it of others.

Earl Miller, a neuroscientist at MIT was recently quoted in Neuroscience Magazine on the subject of multitasking saying, “When people think they’re multitasking, they’re actually just switching from one task to another very rapidly. And every time they do, there’s a cognitive cost in doing so.”

So, what’s this talk about quiet time and thinking doing in a real estate blog? It just seems to me that in this DIY, HGTV, FSBO, Big Data world, we have managed to reduce home selling and home buying to a simple task to be mastered by technology alone without much need for quiet time or deep thinking.

Our lives are busy and most of us need to find quiet time first for our families and also, our professions. A house is not a commodity and a real estate transaction does not respond to a bar code. The principals in the deal will always have to make the big decisions, but much of the heavy lifting that must be done thoughtfully and efficiently when buying or selling a home, should be the quiet work of a Resident Expert(sm).

Yes in My Back Yard

By: Victor Normand

One sure way to lower the cost of housing for first time buyers and increase the supply of smaller homes for those who want smaller homes, including downsizers, is to suspend all zoning bylaws, along with building codes, energy codes, historic preservation restrictions and the like. That’s never going to happen, nor should it, but it’s easy to imagine what would happen if all you needed to do was start building on whatever piece of land was handy. Look around, there seems to be lots of places to build and without needing to get permits of any kind, we could start solving our housing shortages right away.

A movement in that direction exists. As reported recently by the PBS Newshour, an organization in the San Francisco Bay area that calls itself “Yes in MY Back Yard” (YIMBY) is advocating for government action to increase the supply of housing. The YIMBY folks are critical of both the political left and right for their respective positions on housing policy. Affordable housing advocates use the lengthy public approval process to slow and often kill new urban housing developments in their battle against gentrification. And property rights advocates on the political right, rely on restrictive zoning to keep out any housing development in suburban areas.

The YIMBY folks have taken the position that everyone should support the development of more housing at all levels, including luxury housing. And from an economic perspective, they would be correct. Increasing the supply of housing beyond demand will cause prices to fall. If the supply of larger more expensive homes exceeds demand, prices will fall enabling more buyers or renters from lower price points into that market, and so on, eventually effecting all buyers or renters.

But that is not the main focus of the movement. Their first point is that over-regulation has an effect on housing development at all levels; it adds cost and increases approval times which also is a cost. A careful review of all building and health and safety codes with a view toward eliminating antiquated sections or codes that have minimal benefit to society, will help to speed up the development process. Building codes address a broad spectrum of issues affecting safety and comfort, but they do not focus on creating an efficient system for housing development.

And there are often conflicting social goals that effect housing supply. Take the Community Preservation Act, which allows communities in Massachusetts to dedicate tax revenue to purchase land for conservation and also allows funding for affordable housing. The micro economic effect of these two undertakings is clearly beneficial to the community, but from a macro-economic perspective, every acre of land that is placed in conservation increases the price of every acre of land not in conservation. As the old saw goes, God is not making any more land.

The second area of concern is zoning. Unlike building codes which come under the jurisdiction of states, including Massachusetts, zoning is a local matter. Super local zoning, as it is referred to in the Newshour story, makes it hard to adapt to changing conditions. The link between where you live and where you work was weakened or in some cases, broken a long time ago. The imperative for one town to change zoning to allow for smaller homes and denser neighborhoods vanishes when the attitude is “not in my backyard”. Linking local aid to cities and towns based on regional economic growth and the demand for more housing might be an answer.

As the economy grows and populations increase, a smart look at all aspects of housing development needs to happen. At some point in all our lives we are all affected by the lack of choice in the available housing stock. Yes in My Back Yard should be a starting point for all of us as we work to solve our housing issues.

The Original Tiny House

By: Victor Normand

Thoreau's cabinEarlier this month, Sarah Hastings was unable to get town meeting in Hadley to approve a zoning bylaw amendment which would have made her Tiny House legal, so she and her 190 square foot house will be moving on, literally. The first Tiny House builder constructed his house on land owned by Ralph Waldo Emerson at Walden Pond without any complaints from the Town of Concord.  But it wasn’t long after Thoreau built his house in 1845 that the first zoning regulations in the nation were adopted in 1916 in New York City.

The new regulations were seen as a violation of the 14th amendment to the Constitution by some who felt zoning regulations unlawfully restricted property rights of individuals. Lower courts agreed but in 1926, the Supreme Court upheld the constitutionality of zoning regulations. Today, the bylaw most commonly affecting Tiny Houses, including the Tiny House in Hadley prohibits more than one residence on a building lot, even though tiny usually means less than 400 square feet of living area and most of these houses are built on wheeled trailer beds.

Sarah, like most Tiny House proponents, seems undaunted. The “light touch on the earth” Sarah believes in, extends to her heart as well. Although 214 voters at town meeting voted against the amendment, 102 supported her and she believes her efforts have advanced the conversation on the subject of living small. And that, after all, is what Tiny Houses represent.

Sarah, who recently graduated from Mount Holyoke College with a double major in Architectural and Environmental Studies, built her house about a year ago and lived there until May 7th when the town made her vacate and cut power to the house. Thoreau only lived in his tiny house for two years, two months, and two days, never intending for it to be a long stay, though he was at the height of his creativity while he lived there. Similar to today’s Tiny House builders, Thoreau wanted his house to be both a philosophical and practical expression of his life.

He wanted the design to be a unique expression of his personality and probably would have objected to the availability of plans that may be purchased today for replica enthusiasts. He used recycled building materials and kept meticulous records of every penny spent on the project, for a total of $28.13; less than $3,000 in today’s money.

Walden, first published as Walden; or, Life in the Woods, compresses his time in the tiny house to the four seasons of one year and is about his experiment in simple living, clearly the same theme captured by Sarah and her contemporaries. The five main attractions to life in Tiny House Nation include:

  • Aesthetics, both Sarah and Thoreau were concerned about having a design that expressed their individual sense of beauty;
  • Philosophy, living small in a space that denies materialism;
  • Environmental Impact, even as an existentialist, Thoreau probably never contemplated his carbon footprint, but he would have gotten it;
  • Efficiency, the reconstructed images of the Walden Pond cabin and the online video of Sarah’s house read efficiency;
  • Financial, Thoreau cleared the land and eventually gave the cabin to Emerson in exchange for building rights, grew crops in surplus and otherwise lived cheaply; Sarah’s finances are not public, but her millennial cohorts are having difficulty affording housing and besides, they would rather spend their money on travel then housing.

So, where is the Tiny House movement going? Not to Hadley, nor most any other community in most any other state. But there is no question the Tiny House is becoming one of the iconic images of our times and as Sarah says, the conversation carries on.