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Hope is No Longer A Good Strategy

There is no one that wants the housing market to recover more than I do. Over 50% of my investment portfolio is comprised of real estate. My job is to teach real estate professionals what is happening in the market and why it is happening. It would be a lot more fun if I could tell them the housing market is about to come roaring back. I would be lying if I did.

All indications are that the real estate market will remain soft for some time to come. It will be better for everyone if we accept that fact and move on with our housing plans accordingly. Over the last week, there were three major reports released that prove that many people are still unclear as to the severity of the market:

SALES

Each month the National Association of Realtors (NAR) puts out their Pending Sales Report which measures the number of existing homes that went into contract the previous month. Based on the expiration of the Home Buyer Tax Credit, everyone expected the June report would show a substantial decrease in contracts.

Bloomberg News surveys economists each month prior to the release of the report to establish what the economists assume NAR will say. For the June report the economists predicted it would show a 14% decrease.

The actually number was a decrease of 30% – over twice what the economists had predicted!

PRICES

MacroMarkets LLC has just started to release a monthly survey of the leading 106 economists and analysts. They asked them to determine whether home prices will increase or decrease for the rest of this year. The first month of the survey (May) found that only 40% of those participating felt values would decline. The number jumped to 56% in last month’s report (June).

An additional 16% turned negative on future home prices in the last 30 days!

These are the top analysts and economists in the housing industry and they are starting to become much more bearish on any housing recovery.

CONSUMER CONFIDENCE

In a Wall Street Journal article titled Consumer Confidence Appears on the Mend which appeared on the morning of Tuesday, June 29, 2010 it was reported:

“Surveys of U.S. consumer confidence are closely watched on Wall Street, thanks to their decent track record in foreshadowing recessions. That makes them particularly relevant now as investors work to gauge the odds of a renewed downturn. But while confidence is certainly fragile, it isn’t behaving as if another downturn is at hand.

Today, June consumer-confidence figures are due.

Economists expect the index to post a small retreat to 62.5 from 62.7 in May.”

Sounds great! However, here are the actual results that came in later that day:

“Consumer Confidence Index® declined sharply in June. The Index now stands at 52.9, down from 62.7 in May.”

One of the most reliable of sources for financial news (WSJ) got it completely wrong. The index fell 9.8 points, not 0.2 points!

What does this mean to you?

When you hire a real estate professional (either an agent or loan officer), don’t hire someone who is hoping the market will turn around. Hire an expert who understands what is actually happening and will take the time to sit down and explain it to you. That is the only way you can feel confident that you are making the right choices for you and your family.

4 replies
  1. Diane Guercio
    Diane Guercio says:

    The last paragraph summed it up for me. There will be always people who need to buy or sell; go with the agent who can help you arrive at a realistic price out of the gate and has a solid marketing strategy.
    Someone who tells you that they can test the waters at a higher list price is wasting your time, in addition to actually jeopardizing the sale of your home. -Diane at Towne & Country, Realtors

    Reply
  2. Glenn Sanford
    Glenn Sanford says:

    Keep in mind that many economists that are predicting what is going on in the market are the same economists that are hired by trade groups and large companies that have a vested interest in seeing the housing market improve. Generally speaking you don’t want to bite the hand that feeds you and economists are not immune to being influenced by those whom they are paid to provide advise. This ultimately yields in many cases predictions which are more optimistic. Think about being an economist for NAR for example. NAR needs relatively positive spin to keep its members “happy”. If NAR starts quoting Nouriel Roubini on a regular basis the market would have dropped even faster IMHO. What NAR needs is a more balanced opinion to show the silver lining in the storms taking place which ultimately means many of those paid to predict will predict in a fashion that benefits again their employers.

    Also we mere humans generally speaking really don’t want to know how bad the market is. We aren’t quoting Henry Dent, George Soros, or for that matter Roubini for the mere fact that it won’t generally get buyers to purchase homes through us. The consumers will literally get out of our cars and offices and go to someone else who has a more optimistic outlook that supports what they want to do in the first place which is purchase a home.

    Reply
  3. Alex Cortez
    Alex Cortez says:

    Until unemployment numbers start decreasing, we will not see long-term gains in the real estate market. At the end of the day, if a person needs to make a choice between feeding the family and paying the mortgage, guess which one will get picked. Staggering numbers of mortgages in default, low consumer confidence and high unemployment rates are not good indicators of a rebound in the RE market. Rather than HOPING that things will be better, we as professionals need to educate ourselves on what is going on in the market and advise our clients accordingly. Good post.

    Reply
  4. Camille Mims
    Camille Mims says:

    So true! It is more important than ever to re-tool ourselves and look for creative income streams. Fonville Morisey has recently enhanced our full service rental program to turly incubate buyer leads. This is accomplished by auto drip email campaign and cash rebate offer for staying in the Fonville Morisey family. In return, we have boosted our bottom line and saved business we feel easily would have been lost in the past.

    Reply

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