Is It A Good Time to Buy Real Estate or Not?
I recently wrote an article for the local newspaper. What I said in the article was that we would not see the buyers return to the real estate market until they were certain the real estate market hit bottom. I went on to say the only way the buyers would be certain that the real estate market hit bottom is if we raise our prices in Southwest Florida by five percent.
You can imagine the response I got from both the real estate public and the REALTORS. I will say from the e-mails I received I was getting an 80% approval rating. I think the President would be very happy with an 80% approval rating.
However, I got a very nasty e-mail from a REALTOR asking what I was smoking, obviously not what she seems to be smoking. In the e-mail she says that now is a great time to buy and why couldn’t I just say that it’s a good time to buy and leave it at that. Then, in the next sentence, she says prices still have to come down. This is exactly why this strategy the real estate industry employs is not working.:Tell sellers that their asking prices have to come down, and in the next breath tell buyers it’s a good time to buy. This just does not compute.
Which is it? Is it a good time to buy? Or do prices still need to come down? You can’t have it both ways. As the legendary TONTO would say, “Woman speaks with forked tongue.” To whom are we lying, the buyer or the seller? If prices still need to come down, then this IS NOT a good time to buy. We must look like used car salesmen, when we employ this strategy.
Buyers are not that stupid. They overhear the sellers discussing what a REALTOR told them about lowering their asking price if they want to sell.
When I first saw this strategy start to raise its ugly head almost two years ago, I wrote an article saying that, prices DO NOT need to come down, they just need to stabilize for a few years. I knew if real estate industry practitioners chose to employ this tactic, they would destroy the already slowing market. This is exactly what happened. The buyers were already nervous and the so called experts (REALTORS) were telling all the sellers that the prices needed to come down. This caused the buyers to run to the sidelines as fast as they could run, and that is where they have remained and will remain until they are certain prices have stabilized and are headed back up.
My argument back then that prices only needed to stabilize is still true today. Our excess inventory in the resale market was caused by all the new construction that hit the market in the last couple of years. It is not the result of the appreciation of real estate. Historical data tells us over hundreds of years in this country, real estate has for brief periods of time escalated rapidly, followed by a period of price stability, followed by years of moderate gains, and followed once again by rapid escalation.
My advice when I saw this strategy start to evolve was to hold the price on the resale market until the new home inventory was absorbed. Once that happens the resale market will be absorbed and prices will start to go up moderately again. In four years, we’ll all wake up some morning and ask ourselves, "Where is the inventory?"
I would wager a bet that in the next four to five years, when we have very little inventory, the new buzz word in the industry will be Gentrification. That’s because the new home industry will come back on the scene very slowly next time and with a lot of caution.
Prices Remain Relatively Stable
Another argument I made was that we would not see dramatic declines in the prices of the resale market for the following reason: At any given time, only about 8% of the homes in any given community are on the market. This can vary a point or two, but it’s a fairly accurate number. As all REALTORS know, there are sellers who are just testing the market and are not seriously interested in selling. Therefore you can safely say that 95% of the homeowners in this country DON’T need to sell. That’s why these neophytes that keep telling us prices need to come down.
I also don’t agree with the assertion that all real estate is overpriced. Even today there are pockets that are underpriced as well as those that are overpriced.
Here in a little corner of Southwest Florida you can still buy a home on the water with your own private dock where you can keep a 40-foot, 50-foot, even a 75-foot boat, leave that dock and sail around the world. You can buy that home for as low as $500,000. Now look at all the other areas in this country, where you can get that, and do your best to convince me that this property is overpriced.
In today’s world were also hearing the cries about financing. Not so long ago it was common acceptance that any 30-year fixed rate below 7% was a fair rate. I believe it still is. So today’s financing looks OK to me. As far as those subprime loans go, the lenders deserve what they got. They made loans to people who were not qualified for that financing. Yes, there were a lot of good people who were hurt by predatory lending practices, and I hope the government and the quality lenders out there step up and help these good people on the road to financial recovery. But there are also those buyers that were approved for loans who had a history of bad credit. These loans never should have been made. Overall I don’t see financing as an impediment to the real estate market making a comeback. I know this statement won’t make headlines, but it’s what I believe.
I believe that a REALTOR is a financial counselor and it his or her duty to advise clients how to proceed in a particular market. Yes, there are times when a seller must sell, but there are also many times when a seller can wait to sell. It is our duty to give our clients the best real estate advice that we have.
So the question is, “IS IT A GOOD TIME TO BUY OR DO PRICES NEED TO COME DOWN?”
Is There a Blog in Your Future?
January 18, 2019
Negotiating Tip 66: Pulling A Concession
January 18, 2019
Four Tips to Create the Perfect Podcast
January 17, 2019
Avoid Oral Understandings: Contracts and You
January 17, 2019
Clearly State the Form of Deposit: Contracts and You
January 17, 2019