It is time for Brokers, Agents, Buyers and Sellers to come to grips with the new paradigm in Real Estate. Real Estate for too long has been just another trading platform for wealth acquisition. It is founded on an inflationary and ever expanding model of growth. More people in the market and more demand means higher prices and incentive to sell and buy ever more expansive and expensive properties until in the end you cash in your chips and pass the wealth on to the next generation to continue the cycle again. Upon reflection, isn’t this actually just a huge government sanctioned Ponzi Scheme? That is certainly how this last decade ended and it appears that we just cannot wait for it to start all over again. I have potential sellers ask me all the time (still!) “when is the market going to come back”. Ugh! I give them the math and say ok, your home has declined in value about 50% (in East CC County) so now your $1.6M home is worth $800k (or less sincefew are selling) and the historical appreciation is 4% per year. Do the math and it will be 8-10 years (or more adding in inflation) and your home will once again be worth $1.6M in real VALUE – When??
It is sad to see people’s life savings literally gone from their properties, 4 or 5 homes rolled into one and now vapor. I was showing a beautiful home on the Golf Course the other day to a dear older woman who wanted to sell her large home 30 miles away and move closer to her daughter. Last sale price 2006 – $1M even. Today’s list – $575K. The client was very nice and when we got to the house the owners were there (last time I allow that for awhile) and the wife who was losing her home to a short sale sat in the corner weeping. This is supposed to be a win-win scenario, but now not so much. It is painful. I seem to be playing counselor as much as Realtor these days.
My point is that Sellers are hanging on TOO TIGHT and destroying their credit and their emotional health trying to stay in a home that is literally sucking the life out of them. It is what it is, now move on. Talk to an attorney and hit Control, Alt, Delete! Reboot!
The banks are NOT playing fair, they are simply doing what they do and making as much money as possible no matter the affect on people’s lives or the community. Expecting them to change on their own is like talking nicely to a hungry lion, while the lion may be curious as to your gyrations, you are still on the menu. Only 15% of all mortgages that fall inside the Gov guidelines for permanent modification have been approved. I could tell you a dozen reasons WHY but it simply does not matter because it is NOT going to change. Accept it and reboot.
Hopefully we will never again get into such a fevered market and treat our homes as get rich quick ATM’s with window treatments.
We need to get through this glut of underwater houses and reset the market. In late 2009 I would have CLOSED the housing “market”, reset ALL home values through new appraisals (possibly using replacement cost), kept the people in their homes that could afford a fixed 5% / 30 year loan on that new value, forcing the banks to comply and in return giving the banks 50% of the appreciation up to the original value of the loan when ever the home sold next whether it be 6 months or 30 years. But again, this did not and will not happen so we MUST move on ourselves.
Buyers are hanging on an eighth of a point interest rate change or a few thousand here or there on a home that is already 50% below it’s pre crash high. In a few years you will still have a great home at a great price. People will always need a place to live, whether they rent or buy. Money and demand will always set the market. It is my hope that people will stop placing such a high value on bigger, better, higher and faster. I had a (past tense at this point) a friend who wanted to buy a home in 2004 and stated that he would not buy any house unless he could “rip it” from someone. The “trader” mentality has got to stop. Move the market at any cost and then profit from whomever you can in any way you can. Ghandi said that one of the deadly sins is “commerce without conscious”.
Real Estate is a great place to start to reestablish a moral center in commerce. Sellers: Define your realistic goals from where you are today and move forward. If you can afford to stay, great! If not figure out when it is time to accept reality and do not go down with the ship. If you are a Buyer then determine what you really want for next 10 years or so and move forward. Find that house and buy it. If your time frame is less than 5 years, seriously consider renting. When you run the numbers on Rent vs. Own, you would be surprised to find that for many people, especially now, it will NEVER be better to own. If you are a Realtor, do your own business reality check. Place value on what you do and then use your tools to move your own marketplace. This may mean rebating a portion of your commission to your Buyer to get the deal done. It may mean only working with people that will agree to show loyalty by signing a Buyer/Broker Agreement. Use technology to lower your costs and reduce the time needed to properly service your clients. If you are a Broker, consider what your model is telling you. Are you hanging on to the past or moving forward to the future? Do you embrace technology, new ideas, commission rebates to buyers and 100% commission to your agents or are you hanging on to the fancy office, low commission splits and insistence that your agents market YOUR name above theirs?
Whether you are a Buyer, Seller, Agent or Broker we all can act for the benefit of all parties and the communities in which we live. Our market and our way of life will be stronger.
Hit the Ctrl, Alt, Del buttons and reset the market and your thinking. Stop waiting for the Government or Wall Street to do it for you. Focus on the change you want and make it so in your life.
Marston
