A Fork in the road

​"Mom, I need you to resend that 'thing'," Tristan's text instructed. 

Earlier in the day I had uploaded a rental agreement along with Tristan's email address, and three of his friends' (and their parents' ), into Docusign for each of their respective signatures. 

"That 'thing' is a contract my son, and it requires your 'John Hancock', along with your fellow renters and their co-signers." (Credit card companies may readily covet our college-age kids, but rental companies aren't nearly so eager. They want to know a working parent is on the hook.) 

"Please read it carefully," I coached. "There are actual rules and conditionsthat you and your buddies are agreeing to, as the 'leasees'." For these young men, this is their first foray into the world of real estate and they should absolutely read the fine print. 

What makes this story especially relevant is the fact that my son is a sophomore at Colgate University in Hamilton, NY and this rental application is for his senior year. Next September (his junior year ) my little wunderkind plans to be in New Zealand for a semester abroad. (I want our kids' lives; they have no idea how truly blessed they are.)

So why are Tristan and his band-of-brothers looking for rental housing two years ahead of time? Because Hamilton is so small that there are few opportunities to be had and what is available, is in very high demand. So at our son's urging, Cliff and I co-signed the rental agreement for a house that he and his roommates won't move into until August 2019! 

That's a little insane, isn't it? 

And you thought that Bay Area housing was tough to navigate.

It is. 

With its temperate climate, stunning scenery, active lifestyle, and diverse population, is it any surprise that the vacancy rate is practically nil? (Not really.) Which may be why available housing stock seems to be getting thinner, not more abundant, in spite of the fact that prices have been steadily climbing the past several years, signaling homeowners that right NOW is an opportune time to sell. 

"So if it's a 'opportune time to sell,' where's the inventory?" 

Good question. Here in Piedmont, sales were actually down 16% in 2016 compared to sales in 2015, continuing a trend that was repeated in 2015/2014 as well. Lest you think Piedmont alone saw a decrease in housing stock, such patterns appeared in nearly ALL sectors of the marketplace. In short, there were significantly fewer opportunities as a whole, which means Bay-Area home values should remain solid for the foreseeable future . . . unless "supply and demand" changes dramatically. (Not likely. With far more qualified Buyers than Sellers at the ready, I suspect that won't happen any time soon. )

(As an aside, interest rates ARE are on the rise with more increases expected in 2017, which WILL impact the 'affordability index' for many and provide a bit of the long-awaited "softening" Buyers are hoping for - or not??? We're still waiting to see how things shake out. Crystal ball anyone?)

What gives? (Or doesn't, as the case may be?) Personally, I believe the lack of inventory has as much to do with the uncertainty of being a Buyer as it does with the high number of skilled people the Bay Area happily attracts. It's not that Sellers don't want to take advantage of the jump in home values (they do); they just don't want to find themselves having to compete for the next purchase, only to come up short, or worse yet, homeless, if even for a short time. 

Moreover, for those who have spent years, if not decades, in their current residences, these Sellers will likely downsize into properties that are much smaller, but far more expensive, than their last real estate purchases were all those years ago. (Geez, that can be a real disconnect.) For them, unless there's a clear-cut path forward (a move to senior housing, a move out of state, a move into a relative's home, or an off-market opportunity) it can be exceedingly difficult to let go of what they know in order to move towards what they don't . . .

In the prophetic words of The Clash: "Should I stay or should I go?"

What's more, for Sellers whose preference IS to let go, capital gains may be so significant and property taxes so low (especially for those who benefit from Proposition 13), that homeowners may feel it's their duty to stay put, preferring to pass along the "stepped-up value" a future inheritance will ultimately provide their children.This desire to avoid taxes at any cost can keep many elderly handcuffed to their homes for far too long and thus, contribute to the lack of supply, forcing home prices . . . (you guessed it) ever higher. 

While "staying put" may make fine economical sense from a purely mathematical point of view, it may make better practical sense for many to downsize and simplify their lives once their residence becomes overwhelming to manage, and too costly to maintain. Perhaps, such homeowners are better served returning to the rental pool, where an on-site manager cares for the building, the grounds, and the upkeep, even if the calculation for such freedom includes paying taxes. (I don't believe we should stay in a home long after it's safe or convenient to do so, simply to increase the inheritance for the next-of-kin.) 

Is there an easy answer?  

Easy? No. But answers? Yes. With the help of a good financial adviser or experienced estate planner, there are actually alternatives and creative solutions to selling a home, including charitable trusts and timed distributions. (although you may not avoid taxes entirely, you can certainly ease the pain; keeping your home but renting it out while you rent something smaller; converting your property to a 1031 exchange over time; exploring a reverse mortgage, or bucking up and paying Uncle Sam on the capital gains, knowing that you benefited from years of reduced property taxes while your newer neighbors paid far more. (Full disclosure, I am NOT a CPA, banker, or an attorney, NOR qualified to give tax advise, so please reach out to someone who knows their business about such matters. Let me know if you need a referral.)

In short, you may have more options than you believe, but first you have to set your INTENTION. Once that's in place, the next steps become much clearer and easier to navigate.

Let's remember, moving is a highly personal and emotional process, predicated by a range of life transitions from job opportunities, to an impending birth, to graduation, to retirement, to death, to your health . . . . Whether your habitat needs to expand or contract at this particular fork in the road, a move will almost always require you to consider ALL of  your options. Better to take action while you are willing and able, than when you are forced to do so by life's unexpected circumstances.

Does it help to know that you won't be alone? (You're not.There are LOTS of informed and willing people to help and I'm just one of them.) While I won't be co-signing your contracts or picking up the cost (as I certainly will be with my son), I'll definitely be there every step of the way to help coach you thorough this transition, or to find the perfect partner who will, whatever, and whenever, you decide to make a change. 

How can I help you? 

(To check out my Instagram page, go to: instagram.com/piedmontrealtorgirl)