Where do you get your real estate market data and who do you listen to nationally? I have found that the two largest and most respected analytics companies are about 50% different. One company says that there are 7,000,000 defaults, the other says between 3,500,000 and 4,000,000, and it doesn’t make sense how it can be so different. What does this mean and what does it have to do with your daily life and that of consumers? It shouldn’t mean anything.
Consumer behavior usually comes from what they hear in the news and from respected businesses, then they tell their friends, and then the friends take it for granted without investigating and pass it on to more friends.
I get my data for my area from the local MLS and in the last few months supply has been falling, specifically REO inventory which is strongly related to prices, and demand has been rising steadily through the early summer months which gives us gives about a third of a month’s supply. . Now a high school economics class would tell me that the price should hold steady or possibly rise slightly based on a supply and demand metric, but prices are crashing. Everyone I talk to says the market is terrible, even the brokers. They say that some news place reported that this is the worst situation ever! We are in a huge black hole with no way out, not even a light at the end of the tunnel. It’s a terrible time for real estate and they’re leaving the area.
There is opportunity. You can buy almost any house and you have a good chance of getting away with the cost. If you can’t trade it, I can easily rent it to someone who can’t buy or doesn’t want to buy and they’ll pay the mortgage, taxes, insurance and give you an extra few hundred dollars to stay. If you want a place to live, it’s now cheaper to own than to rent in many areas! It makes perfect mathematical sense, and you’ll gain equity and tax benefits over the years.
Now look 5 years ago. The market was great! Everyone loved it. The best time for real estate. All of them and their mother were real estate investors with a few houses. “You can’t lose in real estate.”
The house made no sense. Loans made no sense (even to the Treasury secretary). Prices outpaced inflation to a ridiculous level. Most real estate was a money pit and constantly needed to receive more and more money, whether or not you had to pay it back or just add it to the back of the loan.
How was that a good market? Because everyone said it was. And they were all doing it by creating a false unsustainable supply demand metric.
If you’re in the real estate business, you’re now set up to market to clients in a way that’s going to be almost too easy. Everything is there for you and all you need to do is master the fear. Just as prices rose on a false sense of confidence, now prices are falling on a false sense of fear.
Find buyers and simply tell them the truth. Show the basic numbers in black and white and explain how you really can’t lose today compared to the bubble.
I think if more people looked at what is actually happening instead of what they heard, we will get out of this negative mindset and stimulate more growth and get back to a stable market and speed up this cycle of bad assets.
Spread the good word!