Real Issues in Real Estate

Below you’ll find my take on timely topics and issues of concern to anyone involved in real estate, either as a consumer or professional.  Scroll down to see my latest postings.  You can also review past articles by clicking the “Review Recent Posts From This Blog”  or by searching the category links on the right side of the page.

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Jim Stefanile

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A Guest Contributor

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by James Stefanile, ABR, GRI, SRES, QSC, gCertified, REALTOR/Salesperson, Berkshire Hathaway Home Services New Jersey Properties, Montclair Office

This month I will share this space with a guest contributor, Sarah Callahan. She writes a blog at where she shares tips for home buying.  She’s been kind enough to include my blog in her picks of real estate blogs:

Our company, Berkshire Hathaway Home Services NJ Properties, partners with HMS Home Warranty, one of the biggest in the industry. Sarah advocates for home warranty purchases by home buyers and I am also always available to discuss this opportunity.

Please enjoy this article by Sarah Callahan:

Top Tips for New Homeowners!

By Sarah Callahan

I appreciate the opportunity to contribute to Jim’s blog.  He shares all the ups and downs in the New Jersey real estate market. He doesn’t focus just on selling the home, but also educating his clients on different aspects and types of home ownership. From the first time home buyer to the seasoned home investor, he has worked with them all. Knowing that there is always more to learn about the market, Jim has shown his ability to weather the real estate storm and has won numerous awards for his efforts. I featured Jim most recently in my blog as a Top Real Estate Blog:

Buying your first home is a lot like life, it doesn’t come with a manual, although your realtor is a great guide to getting to know your first home and the whole home buying process! Your realtor is there for you through the whole process of searching and buying, but did you know they are a wealth of knowledge for you after you have bought your home?!

They have seen it all! They know all too well that a happy customer is a customer comes with little surprises when it comes to their new home purchase. If your realtor can help you see all the things that come with your new home purchase, they know this will help ensure you are a happy customer when all the T’s are crossed and you have keys in hand!

Surprises when it comes to home ownership are actually terrible! Who wants to learn something the hard way with the biggest purchase of your life?! Knowing what you are getting into is the best way to avoid those unpleasant surprises.

Here are some tips to help make sure your home runs like a well-oiled machine:

  • Do routine maintenance and upkeep on your homes appliances
  • Replace filters
  • Have annual or seasonal services performed
  • Repair issues on a timely manner
  • Set up reminders in your phone or on your calendar to perform regular maintenance
  • Have air vents cleared
  • Run ‘clean’ cycles on appliances that have them
  • Keep overgrown foliage away from your AC unit
  • Look to replace seals, exterior doors, windows and appliances
  • Replace old thermostats with updated ones with climate control timers

Many of these routine things can be done by anyone whether or not they are ‘handy’! Your home definitely needs some upkeep no matter what the age is of your home. It can be hard to budget for repairs and maintenance when you have never owned a home before. For myself I found that the best way to budget for the unexpected expenses involved in home ownership can be managed by having a home warranty. A home warranty is coverage on items in your home like: fridge, freezer, microwave, stove, oven, dishwasher, furnace, washer and dryer. Many of these appliances have a life cycle that you are buying into without knowing where they are in their life cycle. This coverage is a great way to help budget for unexpected expenses when it comes to repair of these home systems and appliances.

If you aren’t familiar with the concept of a home warranty, your realtor will be happy to tell you about the service and whether or not it may be a good choice for you and your current situation. You can learn more about my home ownership experiences and mishaps by following my blog at:



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by James Stefanile, ABR, GRI, SRES, QSC, gCertified, REALTOR/Salesperson, Berkshire Hathaway Home Services New Jersey Properties, Montclair Office


This installment may seem to veer a little from real estate but I’ll try my best to keep it on the straight and narrow.

I’ve been watching Ken Burne’s film “The Vietnam War” and it’s been a riveting experience.  I remember those days vividly and my own fear of being drafted and my response to that challenge.

What struck me most about the film were the missed opportunities, miscalculations, mis-interpretations, hubris and just plain chuckle-headedness of our leaders, encompassing 4 presidential administrations.  Apart from the human tragedy, I think that was the main theme of the piece.  It, sadly, reminds me of our government’s present day situation.  The details may be different, the issues more contemporary, but the process remains – history un-learned.

The question must be – why does this continue to happen?  To seek an answer we should examine our own day-to-day thinking – every single one of us.

Malcolm Gladwell

Malcolm Gladwell

In his 2007 book Blink, The Power of Thinking Without Thinking, Malcolm Gladwell examines how we understand the world around us and within us.  The novel’s blurb says, Blink is about how we think without thinking, about choices that seem to be made in an instant-in the blink of an eye-that actually aren’t as simple as they seem.

Why are some people brilliant decision makers, while others are consistently inept? Why do some people follow their instincts and win, while others end up stumbling into error? How do our brains really work-in the office, in the classroom, in the kitchen, and in the bedroom? And why are the best decisions often those that are impossible to explain to others?”

Malcolm Gladwell Blink_Gladwell’s conclusion is that we exist on automatic.  Indeed, many mental health professionals maintain that the brain wants to function on automatic – it’s less work among the mountain of data our brains must process every moment.  Blink shows how this affects everything we do.  Our reliance on clichés and the popular lexicon (“awesome”, “amazing”, etc.) are, in my view, more examples of automatic thinking. Reacting to situations in the same way over and over is also thinking without thinking.

Automatic thinking is a compelling explanation for the stagnation and wrong-headedness so epidemic and long-lasting in our polarized national discourse and listless leadership.  Poll after poll suggests that we the people believe the information we see that agrees with our already-held beliefs.  This automatic response cements our tribal divisions.

My goal as a person and a realtor is to process more realistically.  I hear many automatic responses to the varied situations encountered in real estate. These “blinks”, from customers, vendors, lawyers and realtors, more often than not, have little relation to the reality of a given situation.

Like everyone else I have to fight decades of automatic processing and negative training to overcome the automatic habit.  I don’t hold myself up as some exception to the rule.  The only credit I give myself is that I have a hint of how jumbled I am.

When I pause after you ask me a real estate question it’s because I don’t want to give you some “canned” answer.  My training and experience do count for something but your situations are always unique and my responses should not jam them into a stock response.

I won’t comment any further on our crippled national discourse.  Sadly, productive discussion is impossible when opposing positions are in automatic cement.  I think the best we can do is to try to overcome our own stagnant view of the world in whatever tiny sliver of it we inhabit.

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When Housing Becomes A Global Asset

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by James Stefanile, ABR, GRI, SRES, QSC, gCertified, REALTOR/Salesperson, Berkshire Hathaway Home Services New Jersey Properties, Montclair Office


As more and more foreign buyers use US real estate as a home or as an asset, especially in the higher priced segments, brokers have expanded their marketing reach internationally.  Our company has many, very well developed global marketing platforms in place.  As realtors, we are also obliged to use care when dealing with international buyers to avoid any tax evasive or extra-legal activity.

There’s much more to this topic and you may find the following article from The New York Times of July 21st interesting:

Image Credit: Minh Uong/The New York Times

In Vancouver, British Columbia, the price of a single-family home has soared so fast over the last few years that even many well-paid local workers have been pushed out of the city.

In Miami and New York, new luxury apartments are rising rapidly, often sold to anonymous buyers, sight unseen. In Melbourne and London, housing shortages have worsened even as recently purchased homes appear to be sitting vacant.

In each of these cities there are at least some indications that what is troubling the housing market can be traced elsewhere — to Russian oligarchs, Brazilian bank accounts, Chinese businessmen. It’s possible that foreign money isn’t just driving up prices for penthouses; it may also be distorting the market, to the detriment of lifelong residents.

But the true extent of the phenomenon is maddeningly hard to measure. So are its broader economic effects. Local governments have barely attempted to track the cash influx. And each of these global cities has become attractive to investors partly because housing in them is scarce, making claims of insufficient supply and excessive demand all the more difficult to untangle.

It’s clear that foreign cash is not the sole culprit for rising prices in cities that are also attracting young, educated workers and where land constraints and zoning policies have long thwarted construction. Yet it’s also true that foreign money has surged into housing in the United States and other countries. Evidence suggests that in New York City, Vancouver and parts of California there is enough of it to create ripple effects that may disturb local residents.

New data this week from the National Association of Realtors estimates that foreigners, led by the Chinese, invested $153 billion in housing in the United States in the year that ended in March, up a remarkable 49 percent from the previous year. Nonresident foreigners were responsible for half that total.

That is the largest sum since the organization began tracking foreign investment in 2009, and those purchases amounted to 10 percent of the dollar value of all existing-home sales in the United States last year. Nearly half of that money went into just three states: California, Florida and Texas.

“Without a doubt, foreigners are pushing up the prices in California and Florida,” said Lawrence Yun, the chief economist for the National Association of Realtors. That is good for existing homeowners, he said, and it is positive for the American economy that foreigners are confident about investing here. But it also pushes first-time buyers out of local markets, Mr. Yun said.

Anger at who is causing that harm can stray uncomfortably close to xenophobia. But politicians and anxious residents often add that their real grievance is with foreign money, not foreigners. And maintaining that distinction is important if cities that have long prided themselves on being cosmopolitan want to continue embracing immigration while curbing speculation.

Setting aside the risks of money-laundering and tax evasion, a big influx of foreign capital poses two potential threats to a local housing market.

The second threat aggravates the first: If foreign buyers are looking for assets and not residences, a lot of that housing may sit empty. Neighborhoods begin to lose their neighbors, and local restaurants and shops lose their customer base, an eerie scene some corners of London have experienced.

Across an entire city, those costs outweigh the benefits of foreign investment, according to two finance professors, Jack Favilukis of the University of British Columbia and Stijn Van Nieuwerburgh of New York University. They modeled what happens when a market like New York City is shocked by an inflow of absentee out-of-town buyers.

Data they obtained from CoreLogic shows that the share of home purchases made by out-of-town buyers has increased steadily since 2004 in both metropolitan New York and Manhattan. More than one in 10 purchases in Manhattan now includes such a buyer (the “out-of-town” definition here doesn’t distinguish between domestic investors and Russian oligarchs, but the effects are the same in the modeling, and the authors think of the problem as one of foreign money).

When they assume a worst-case scenario — all of these out-of-town purchases sit vacant — rents and home prices in the city rise, wages tick up thanks to new construction jobs, commute times for workers grow longer, and center city neighborhoods become less diverse as the wealthy move in. All else equal, they conclude, the rise in out-of-town buyers from levels seen a decade ago pushes home prices up in New York by about 1.1 percent. That may not sound like a lot, but the net effect is a negative one for the city’s welfare, the researchers conclude.

“And then there are costs that are harder to quantify,” Professor Van Nieuwerburgh said. “The texture of the city, the socioeconomic makeup of the city, is changing.”

What, then, do you do about all of this if you are convinced that it’s a problem? Vancouver instituted a 15 percent tax on home purchases by foreign nationals last year to discourage them, and Toronto has done the same. But that approach could miss money traveling through extended families, local middlemen or opaque corporations determined to hide a buyer’s identity. And such a tax — if it’s aimed at curbing properties that are purely investments and not residences — requires exceptions for legal immigrants who intend to work and make their homes in the city.

Rhys Kesselman, another professor at Simon Fraser University, has proposed an intriguing alternative: a property surtax tilted toward high-end homes that would be deductible against the owner’s income tax. Local residents paying income taxes would effectively owe no surtax. Out-of-town investors, foreign or domestic, who don’t work in the local economy would be hardest hit (with some concessions for resident retirees).

The elegance of that idea is that it doesn’t require local governments to figure out who is foreign and who is not, or which homes are vacant and which are occupied. And it recognizes that the real problem isn’t foreigners; it’s speculation in the housing market that, these days, often tends to come from abroad.


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Whither The Market?

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by James Stefanile, ABR, GRI, SRES, QSC, gCertified, REALTOR/Salesperson, Berkshire Hathaway Home Services New Jersey Properties, Montclair Office


Let’s see where the suburban Essex County housing market is heading as we head into the second half of 2017:

UntitledClick on the table to open a larger version

It’s obvious that the market is not only improving but consistently strong. Number of closings are up, days on market are down, sales prices are improving and sellers are getting a larger percentage of what they ask.  There are some outliers also.  Caldwell’s sales prices are down slightly on average, North Caldwell’s ratio of price vs. sale price is down 3 percentage points.  Here’s a surprise: Glen Ridge, the Essex County top performer for many months has seen its sales prices rise almost 5% year over year but its days on market are up by a week and, most significantly, its price vs. sale price is down by 8 percentage points.

The major difference between the current market and the boom market we experienced until 2007 is that not every metric is improving for every town.  Also the improvement is more gradual which is a good thing.  Statistics aside, I have seen bidding wars break out in all the usual, popular towns and I’ve noticed it has spread beyond those borders into towns that traditionally don’t enjoy that phenomenon,  Buyers need to be disciplined and resolved.

Market Stats Jan-June 2017 vs 2016-page-002Click on the table to open a larger version

The number of listings and average list price, year over year, as reflected in this table is of minimal importance in my opinion.  Listings come on for a variety of reasons, not necessarily indicative of a trend and sellers, sometimes, list for prices that defy reason so I don’t look for patterns there.  The most important statistic here is the absorption rate for each town which is calculated by dividing the number of active listings in a given period of time by the number of solds in the same time period.  The resulting number expresses the number of months it will take that market to absorb (sell) what’s actively on the market.  There is noticeable improvement, things are selling more quickly but there’s also more outliers here.  There are 5 towns in suburban Essex where the absorption rate has gone up.  Maybe not significantly, but up nonetheless, except for Caldwell which seems to have taken a beating.

The conclusion to be drawn from all this is that the market is performing the way it was predicted to perform since before the recession ended.  The pundits said the housing market would improve and gain momentum but at a normal pace with normal, gradual appreciations.  This is healthy, especially since the market is as robust as it is recently.

Will this continue?  It all depends on what segment of the market you’re buying or selling in.  For example, the 1.5 million plus segment is in a significant pause as of this writing whereas it was white-hot only a few months ago.  The segments under a million are consistently selling with competition but they must present well or else they will sit.  That happened even in the boom years.  You will also notice that different towns have different stats, some faster and more expensive than others.

As the economy improves the interest rates will inch upward and the Federal Reserve is getting ready to release a ton of bonds into the market which will also have an effect on interest rates.  Higher rates may push some buyers out of the market, as will increased property taxes.  If health care spending changes and/or the tax code changes, that will certainly effect buyer confidence and ability to buy.  For now, pragmatism and discipline should prevail on the part of seller and buyer.  In fact, those are good practices no matter what the market conditions.

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The 10 Biggest Threats Facing Real Estate

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by James Stefanile, ABR, GRI, SRES, QSC, gCertified, REALTOR/Salesperson, Berkshire Hathaway Home Services New Jersey Properties, Montclair Office

This article comes from a recent issue of Realtor Magazine.  I found it very interesting and thought you might also:

10 Biggest Threats Facing Real Estate


Global uncertainty and political polarization are the top issues facing the housing industry in 2017 and 2018, according to The Counselors of Real Estate’s annual list of the Top 10 Issues Affecting Real Estate. The list was compiled using feedback from 1,100 real estate advisers from around the world who met at a recent CRE conference.

Many of the issues are interconnected and reflect disruption in the economy and multiple real estate sectors, says 2017 CRE Chairman Scott Muldavin. “Despite this unsettling environment, opportunity remains embedded in every issue on the list,” the CRE report notes. Here are the top 10 issues cited in the report.

1. Political polarization and global uncertainty. “Uncertainty about changes to trade, travel, and immigration policy threaten cross-border investing, hospitality properties, retail, and manufacturing supply chains, among other effects,” the report notes. “Rising interest rates and retail inflation will make middle-class homeownership that much more difficult. Longer-term implications could be much more severe, as polarization prevents long-term fixes to issues such as infrastructure, affordable housing, local and state pension liabilities, and education.”

2. The technology boom. An unprecedented wave of commercial real estate technology innovations are expected to change the way real estate is bought, sold, and managed. Investments in commercial real estate tech startups hit $2.7 billion in 2016. About 1,600 of these startups now exist worldwide. Robots, big data, autonomous vehicles, and online retail are also expected to have a major impact.

3. Generational disruption. “Boomers’ and millennials’ divergent views of where they live, work, and play increasingly impact the property markets,” the report notes. “The generations are crossing paths everywhere: in the workplace, in housing, and at the local bar and grill, intersecting and sharing spaces despite their often disparate priorities when it comes to the built environment.”

4. Retail disruption. “The trend toward transforming retail into ‘experiences’ continues to develop and is offsetting shrinkage in the physical bricks-and-mortar consumer-goods platform,” the report says. “‘Experiential’ retail drives customer traffic to a more diverse and highly participatory environment targeted to a variety of age groups and interests. This sector has transitioned into a kind of ‘Omni Channel’—encompassing e-commerce, reduced or repurposed physical elements, and a host of previously unforeseen spaces, both physical and virtual—with a current emphasis evolved from bricks-and-mortar shopping to the timely, efficient transfer of goods from source to inventory to consumer.”

5. Infrastructure investment. The private sector is directing significant funds to infrastructure projects, recognizing the need and long-term rewards of investing in roads, bridges, tunnels, ports, and airports. Investors now oversee $376 billion in U.S. infrastructure dollars. “It is clear that the need for infrastructure investment is critical,” the report says. “The movement of goods, which involves everything from ports to airports to warehouses to roads, highways and railroads, is further straining an aging and highly vulnerable interior framework. Add to this the need for pipelines, electricity transmission, and water distribution, and the immediacy of infrastructure needs becomes even more pronounced.”

6. Housing disparity. “Safe, decent, affordable housing has been shown to have a stabilizing effect on urban economies, crime, and public health,” according to the report. “A current lack of inventory has generated a spike in home prices and, as a result, declining affordability for many home buyers, particularly those in lower-income sectors.  A critical disparity exists between housing needs and housing supply.” The report cites a growing affordability gap and limited availability of housing in locations with significant job growth, such as major cities and coastal regions.

7. Threats to the middle class. In 2007, the average middle-class income was $57,403. Now it hovers below inflation-adjusted levels from nearly two decades ago at $57,909. These income levels have yet to return to their pre-recession highs, and stagnant income growth will continue to press on the middle class.

8. Emerging role of healthcare in real estate. The nation spends more than $3 trillion each year on healthcare costs—about $10,000 per person—which is double the average for developed countries worldwide. “The real estate industry has emerged as a major player to cost-effectively improve people’s health,” the report notes. “Building occupants are increasingly demanding that the space they inhabit be designed, constructed, and operated in ways that advance positive health outcomes.” A growing focus on healthy buildings is emerging, as people spend about 90 percent of their time indoors. Research from the Mayo Clinic shows that healthcare contributes 20 percent to maintaining people’s health, while environmental and behavioral factors account for 40 percent.

9. Immigration. As the Trump administration seeks to enact more restrictive immigration laws, some housing leaders are growing concerned about labor shortages in homebuilding. Demographers note that immigrant groups are a source of household formation. “New immigrants tend to rent, boosting demand for multifamily housing, especially in gateway cities,” according to the report. “Recent surveys suggest that immigrant populations aspire to own homes and to move relatively freely from cities to suburbs and back in the search for employment. Labor mobility and homeownership rates will be constrained by limiting immigration.”

10. Climate change. The National Oceanic and Atmospheric Administration released a report this year that shows sea level rises are expected to more than double from 2013 forecasts—to between 6.6 and 8.6 feet by 2100. “While a potential rise of sea level may seem far in the future, NOAA also estimates that annual frequencies of disruptive and damaging flooding would increase 25-fold with only a 14-inch increase in local sea level rise,” according to the report. “Major cities such as Miami, New York, New Orleans, Tampa, and Boston are projected to have the most costly problems, with South Florida and most coastal areas all exposed to differing levels of sea rise risk and cost. The implications of potential sea level rise and related flooding on real estate values is positioned to explode due to dramatic increases in the volume and accessibility of information on the consequences of sea rise.”

Source: “Political Polarization, Global Uncertainty Top CRE 2017-2018 Top 10 Issues Affecting Real Estate List,” The Counselors of Real Estate (June 14, 2017)

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Market Update

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by James Stefanile, ABR, GRI, SRES, QSC, gCertified, REALTOR/Salesperson, Berkshire Hathaway Home Services New Jersey Properties, Montclair Office

Just a quick look at the local Essex County housing market.  The spring real estate season is hitting its stride with robust demand and not much inventory to satisfy the wishes of a, seemingly, competitive buyer pool.  I say competitive because the era of multiple offers is back with a vengeance.  Towns like Montclair and Glen Ridge have always been in demand and now that competitive demand is spreading throughout the area, even into towns that have not, traditionally been hot.  West Orange is a good example.  There’s always been a good supply of moderately priced homes to choose from there.  Now, anything of value is attracting multiple buyers and selling for well over the asking price.  I’ve worked with buyers in West Orange who have been out-bid on numerous houses.

There’s always a temptation for sellers to price aggressively in an atmosphere like this.  Again and again I tell sellers: price it correctly.  Don’t be overly ambitious because even in the boom years an overpriced house sat unsold.

The other temptation is under-pricing to spark a bidding war.  Not a good idea at all. What if you only got one, asking price offer?  Would you accept a price you know is too low?  Never price a house for less than you will accept.

So buyers need to be disciplined and determined in this environment.  When you hear there are 4 other offers, either go big to win, or go home.  Waffling and hesitating and offering dribs and drabs prices won’t get you that house in today’s environment.

Unlike those boom years I mentioned, this time the market is healthier because it’s not anomalously overheated.  Even with this strong demand, homes are not appreciating at ridiculous percentages.  What we can hope for is strong demand with more inventory to satisfy it in order to make this a long-lasting, robust market and not a flash-in-the-pan followed by a slump.

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