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What’s Ahead?: Inflation, Condo Flaws Or What?

Written by Posted On Tuesday, 27 July 2021 00:00

Busy buyers and sellers—including their partners and families—focus on personal details to achieve their best real estate results, but is that enough?

Would-be buyers and sellers are often so distracted by the many personal decisions involved in a real estate transaction that they overlook the context that surrounds them and their transaction:

• Buyers are busy deciding on design and decor must-haves while they stretch their already busy days to include online and real-time listing evaluations and a continuing search for “the best buy.”

• Sellers are intent on making their current real estate shine in every way possible to get “top dollar” while they attempt to make the best next-real-estate-step possible.

Beyond your own personal situation and resources, what should you—as a buyer, seller, or both—prepare for to achieve the best real estate results?

Well in advance of your real estate transaction, do you consider how the context of emerging and existing large-scale financial and social impacts—many of them pandemic related—may influence your choices and ultimate success?

Surrounding the reality of this never-before-experienced pandemic and its ever-changing economic and social stresses there are significant forces at work. Anticipating how large-scale economic influences may affect your proposed very-local real estate transaction will enable you to achieve the best results in spite of what’s next and then next….

The real estate professional(s) you select to assist you should be aware of significant economic and social influences in their trading area. Their challenge may lie in engaging the attention of prospective buyers and sellers on topics beyond the personal decisions buyers and sellers are intent on. Management of information overload is a significant role for these professionals as they address contextual issues that influence buying and selling real estate.

As a buyer, seller, or both, will you listen to what may be significant economic context for your decisions and transaction?

1. Weather Influences Economics

According to The National Oceanic Atmospheric Administration, the western United States is currently under the influence of an epic prolonged heat dome, an expansive region of high atmospheric pressure characterized by heat, drought, poor-air quality, and heightened fire danger.

Q: What are your reactions to the economic considerations of heatwaves, wildfires, drought, prolonged smoke exposure, algal blooms, or flooding where you have real estate to sell or where you would like to buy?

2. Employment and Income Patterns

Whether you’re a renter-turned-buyer or a seller-turned-buyer, applying for a mortgage may be in your future. Put your finances and your income in order before you begin your home search. Remember, bad financial advice costs the advisor nothing, but may cost you your future!

Employment projections and economic analysis like An Overview of the Economic Outlook: 2021 to 2031 can assist with career and income evaluation and planning as you make post-pandemic changes. They can also be applied to assess the stability of employment and economic projections for the area where you own or want to own real estate.

Q: How stable will your chosen lifestyle be in your desired location?

3. Inflation Looms

Inflation is much-talked about, but it is complex to predict. At this point, most experts see rising inflation as a temporary response to pandemic economic shifts which include massive fiscal stimulus and heated demand. Financial markets may remain volatile during this uncertain transition period. As pandemic supply and distribution pressures relax, currently-rising inflation may decline…or will it?

Inflation is an economic indicator that occurs when prices rise across a pre-set "basket of goods and services" like the CPI or consumer price index. Sometimes, rising food and fuel prices alone can cause inflation. These items are essential and integral influences on most products and services. If prices of food or fuel increase dramatically, other prices will be inflated, too:

• Real estate prices and interest rates increase, therefore, mortgage qualification may become harder.
• Purchasing power declines and cash depreciates, so affordability becomes the issue.
• Where buyer demand exceeds supply of homes, inflation of real estate prices can become pronounced.  

Q: Are you worried about how you can preserve purchasing power and control financial instability?

4. Nothing Lasts Forever

Building Inspections:

Pre-purchase house inspections make buyers aware of possible pending repair and modernization expenses, so they can decide where purchase value lies. High-rise condominium-unit buyers may not have access to or seek out comparable information regarding the overall structure of the building they wish to purchase a unit in. Reinforced concrete flaws, condo “management by committee” inefficiencies, municipal inspections that did not consider overall structural condition, and climate change are among reasons proposed for the June 24, 2021 Champlain Towers building collapse. Investigation into the actual cause(s) continues.

Ricardo Wolf, Co-Broker/Managing Partner of South Florida-based Wolf Real Estate Group, emailed his local viewpoint on issues related to this condo collapse: “This severe structural failure causing a building to pancake to the ground, similar to a professionally executed controlled blast, has never happened before in this country. The Champlain Towers are also not decrepit forty-year-old buildings; these are stable, luxury properties, very well maintained that marked a new era in luxury condo construction in South Florida. The City of Surfside is an unlikely candidate when it comes to lack of vigilance or enforcement…. That said, these older beachfront structures did not have the benefits of modern-day materials, superior engineering, state-of-the-art technology and building codes that have continued to evolve beyond the construction date of the Champlain condo development….

“But do these shortcomings imply that the hundreds of buildings constructed forty-years ago or more have a real potential of being unsafe? If so, the implications for all condo development activities would be severe and cast serious doubt about the long-term viability of condo ownership…. But, buildings, especially those designed to withstand hurricanes and the elements of salt, severe heat and tropical rains, do not crumble to the ground, antiquated codes or not, without a very powerful trigger.

“Could these extreme cases [have] been mitigated through proper inspections and enforcement of already strict building, zoning and public safety codes? Who is responsible for making sure these buildings remain safe and for the circumstances condo owners find themselves in today?...The price tag to get many of these neglected buildings back to a satisfactory condition may prove to be financially unfeasible for many....Our cities, counties and the State must take a proactive approach to ensure there is a process in place to handle these unprecedented situations without further disrupting or destroying lives.”

Q: How rigorous will you make your investigation of the overall structure of a condominium building you expect to buy a unit in?

Crumbling Infrastructure

Every four years, the American Society of Civil Engineers’ Report Card for America’s Infrastructure reports on the condition and performance of American infrastructure, based on the physical condition and needed investments for improvement, listed by state. Forty-two per cent of bridges are older than their designed lifetimes of 50 years and 7.5% carry a “structurally deficient” rating. Researchers have known for years that reinforced concrete structures face increased vulnerabilities due to climate change.

Q: How could this flawed transportation network impact value where you own or want to own real estate?

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PJ Wade —       Decisions & Communities

Futurist and Achievement Strategist PJ WADE is “The Catalyst”—intent on Challenging The Best to Become Even Better. A dynamic problem solver and author of 8 books and more than 2800 published articles, PJ concentrates on the knowledge, insight, communication prowess, and special decision-making skills essential for professionals and their clients who are determined to thrive in the 21st-Century vortex of change.

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