Contrarions guilty of the FUD factor: fear, uncertainty, doubt
Craig King of Real Blogging, the official real estate industry blog, says it's a great time to be buying or selling real estate.
"No matter what you're selling, conventional wisdom is that the FUD Factor (fear, uncertainty and doubt) tends to freeze buyers in their tracks." He goes on to say that,"If we do a good job of telling our story, I think prospects will realize it's a time to buy, not a time to stall."Certainly real estate will be purchased and sold in any market. Does he have a good point?
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16 comments:
I've been called a fear monger,moron, "...just hunker down mentality from someone who does little business" etc.
We'll you get the point. Fearful, no. Alarmed, no. Preparing, yes. If 75% of our revenue is generated from real estate sales and it falls off like it has in other markets, then at least I'm guilty of being "concerned." Like any smart business owner, you prepare for changing markets and difficult times, something I see lacking on a too frequent basis, particularly by my allied real estate professionals who have never experienced a market shift. You only have to have your ass kicked once for you to learn. At least I did.
Property that is priced fairly for its age, condition, market (e.g. NYC will always be valued higher than Muleshoe TX), neighborhood, and type (SFH, condo, retail, etc) WILL sell regardless of the strength of the market.
Houses that are not priced correctly just won't sell, period.
When all the news, all day, everyday, is screaming "housing crash dead ahead", I'd say it's a good time for buyers, the smart ones anyway, to be full of fear, uncertainty and doubt.
anon@12:53,
The funny thing is that an argument you sometimes hear from the "there is no bubble" crowd goes something like this:
"If everyone is saying we're in a bubble, then that's a good indication that we're not."
I don't "get" the logic, but I just thought I'd throw that out there.
Houses that are not priced correctly just won't sell, period.
It also has a lot to do with how much money is available out there and how confident buyers are feeling..
A 'fair' price varies from market to market.
http://vancouvercondo.info
(fear, uncertainty and doubt) tends to freeze buyers in their tracks.
That's an instinct called self-preservation.
re: if everyone's talking bubble, it's not a bubble.
The reason all the news outlets are reporting on the coming crash is because it has already begun.
Next step, the NAR itself leads prices down. They began talking about how "unaffordable" housing has become a few weeks ago.
Now they've done a survey that shows, surprise surprise, many Americans are one pay check or one .25% interest rate hike away from losing their home.
see:
http://www.realtor.org/housopp.nsf/pages/pulsesurvey
Realtors have to eat too you know.
This link:
http://www.realtor.org/housopp.nsf/pages/pulsesurvey
is broken or the complete full link is not visible. Can you please put it in tinyurl format?
Hey guys, the National Association of Realtors says everything is going to be OK. I don't know why you are all worried ;)
http://www.realtor.org/Research.nsf/
Pages/Anti-BubbleQ&A?OpenDocument
Is it at all funny that the URL for the local Market-by-Market Home Price Analysis Reports are filed under "/anti-bubblereports" and all have the same "convincing" propaganda at the end of the reports on why prices will never go down?
http://www.realtor.org/research.nsf/pages/anti-bubblereports
You all have probably seen this, but look at Cincinnati, OH compared to Seattle. Bull vs Bear Market. My mother is not rich even with two houses and two apartment buildings. On the other hand she is retired on them and they would all pay the mortgage with rent even if purchased at todays prices. And it is very unlikely she would lose her shirt on them.
I have "made" more on one view home and two rentals in Kitsap County in three years than the total value of all her rental properties. But hers cash flow, mine don't.
Ohio is not such a bad place to live...
Yikes! Add "2006" to the end.
.........../pulsesurvey2006
Sorry!
I've heard this more and more in recent years: "Only risktakers make money and end up being the big players." It's essentially the "What? Are you chicken?" argument, but it's been preached so much that it's become conventional wisdom.
We now live in a world where everyone is either a new-money superstar businessman(Bill Gates, Michael Dell, Jeff Bezos, Mark Cuban, etc.), a lotto winner, an athlete, or a pop star. You don't make "real" money these days unless you do it overnight by gambling on a million-to-one shot.
I watched my parents get caught up in the go-go lifestyle of the 80's, and watched them overexpand (and soon after, destroy) their business right after the 1987 stock crash. I watched friends forced to either kill themselves at work, or get canned (usually both) in the dot-com bust, usually after overspending and overcommitting. These are the fearless buyers whose finances get decimated by "unexpected" downturns. These are the poor saps who get taken for a ride by some fear-mongering, "buy-before-you're-priced-out" RE sales pirate.
I'm only 35, but I still remember when caution and patience were positive characteristics. Maybe after 2 massive bubbles pop in less than a decade they will become revered values again.
I don't know if this was already posted, but I found this article on the NAR site:
The Federal Reserve Board estimates that homeowners have a net worth nearly 36 times more than that of renters. Over the past 10 years, the cost of rental housing in the United States has increased an average of 3 percent per year; average rents are projected to rise 4.1 percent this year alone. With a 3 percent annual increase, a current rental payment of $1,000 per month would increase every year and amount to $137,567 after 10 years, with no wealth accumulation.
In contrast, a $210,000 home purchased today with a downpayment of $10,000 and a 30-year fixed rate mortgage at 6.5 percent would cost a steady $1,100 per month and yield a net worth of $138,521 after 10 years, assuming an historic 4.5 percent annual appreciation rate.
Hmmmmm..... Where can you find a place for $210,000?????
This is one of their top arguments for buying right now....
We now live in a world where everyone is either a new-money superstar businessman(Bill Gates, Michael Dell, Jeff Bezos, Mark Cuban, etc.), a lotto winner, an athlete, or a pop star. You don't make "real" money these days unless you do it overnight by gambling on a million-to-one shot.
I do think there's an overemphasis on the superstars in our society (especially athletes and celebrities). Several of the examples you list though were far from overnight successes. Bill Gates started Microsoft in 1975 and it was 12 years before they IPOd. He's been there almost 26 years. Michael Dell is similar - starting his business while in college and toiling away for years before achieving success. Mark Cuban, eh... a little different :-)
I do agree with the central point that too many people try to emulate the lucky few that where in the right place at the right time, or had a combination of natural talent and luck that propelled them to the echelons of their trade; Rather than the far more likely route to success of living under your means, saving for tomorrow, etc. - i.e. "Millioniare Next Door" behavior.
That said, I do think being willing to take risks is an important element in success. I took a huge risk when I moved out of my stable IT job and to Seattle for a dot-com job back in 1996. It turned out great for me in a number of ways. I'm not retired, but I was able to get a huge "start" in life through my stock options. I also gained valuable experience I gained has propelled my career quite a bit.
Even with those "wins", I still got hit (laid off) by the downturn, but I survived because I had lots of savings at that point (thank you stock options). I could have done a lot better if I timed the market perfectly, but I still ended up far ahead of many of my similarly out-of-work friends in IT that never left their stable jobs.
I guess all I'm saying is that there is some element of luck in life. You could take a huge risk and have it blow up in your face. You could choose to stay where you are and miss a huge opportunity (and not just money). I don't buy the idea that people who take risks are all gonna be decimated or come out worse. Plenty of people who have diversified investments (across the market) have seen their investments tank along with the "risk taking dot commers" in the last 5-10 years. The only amount of caution that can avoid that is taking all your money out of stocks and putting it in a CD, which doesn't usually work in your favor.
As an example, my parents took a huge risk almost 30 years ago stretching themselves to buy into a neighborhood they saw was rapidly appreciating. They were living in a small townhome and had a growing family. They borrowed some money from family and got a VA loan for their current house, because they were afraid of being priced out of the market. I'm sure it may not feel like it, but that sounds like today's market. Otherwise, they've lived conservative lives (lots of retirement savings, buying used cars, no fancy clothes, etc.). And 30 years later, they have plenty of equity in their house and prices have indeed risen dramatically - plus they got to live in a great neighborhood (as did I and my siblings).
I suspect, to the chagrin of RE bears, many people buying homes now will be in the same position 30 years from now. People buying homes because they fit their family's needs and planning to stay for a long time will end up fine.
"Bill Gates started Microsoft in 1975 and it was 12 years before they IPOd"
That was funny you were talking about Microsoft and then mentioned IPOD (apple).....I know it was in reference to issuing there IPO (IPO'd) but was still funny to me!! :)
jrcricket-
Your example of your parents buying into a neighborhood that was rapidly appreciating years ago is not an apt comparison to 2006 Seattle IMO.
The reason being that we are seeing a mix of appreciation and downgrading (price reductions, long DOM's, softening economy, etc.)
It would have been an EXCELLENT comparison to the late 90's market in Seattle. Those days are gone. And obviously, anyone who was smart enough and had the money to buy in from 96-99 is sitting pretty and will do fine no matter WHAT happens to the market.
C'mon, buying a house is not like a "hail mary pass at the end" or gambling.
Gambling is set up the house always wins in the end. The longer you play, the more likely you are to lose. A Hail Mary pass only works if you're within a certain number of points.
But everything in life involves risk, so to claim that people who take less risk are always better off than those that take more is to ignore the history of the stock market, housing market, employment, etc. I'm not talking about playing the lottery, or chasing after every new-fangled business idea of the week - but taking the risk that your $100k in college tuition will give you a better job, that your choice of a job will work out more than sitting where you are, etc.
The odds in many of those things are, ultimately, in your favor. Unlike gambling and hail-mary passes.
Housing is not "set up" so that the banks are the ones who "win" in the long-run. In most cases, historically, both the banks and consumers have "won".
Prices, like the stock market, are ultimately determined by "what the market will bear", even though there are lots of economic elements that factor into pricing decisions.
Historically, the longer you "play" at RE, the better off you are. Most people have come out ahead by purchasing their primary residence and maintining it over a 20-30 year period.
I will concede there is risk in real estate, and substantially more risk in recent years. But I simply don't believe you have demonstrated some sort of "sure to be correct" argument that makes all current decisions to buy a home bone-headed in the long-run.
As others have pointed out elsewhere, your ability to take advantage of any price declines will depend on how much you gamble and "time the market" correctly. What if you buy before it's bottomed out? What if you wait and it rebounds? What if the house you want doesn't go down at all?
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