Pat Grimm is Owner/Broker of Windermere Real Estate/Capitol Hill located on 19th Ave E. CHS invites contributions from all community members.
Based on the quote attributed to me in the PI yesterday morning and the spin of the story http://www.seattlepi.com/local/412880_housing03.html , you would think that the real estate market is in the throw of a complete rebound. That’s just not the case. It always amazes me what bits and pieces of a conversation actually make it to print. Assuredly, the story is never as good or as bad as these articles want to make it. Personally, I’d like to skip the drama and just be real.
There is so much information coming at us all the time that we seldom get past the headlines. There is simply too much information noise out there. Unfortunately, the only thing most people likely saw in the article yesterday morning is “Home Sales Up 81%”. They don’t stop to consider the fact that if you take a number … any number … and decrease it by 50%, and then subsequently increase it by 100%, you arrive back at the same number. That’s just simple math. But using increases and decreases by percentages without putting it in the context of a bigger picture is extremely misleading. The fact is that the reason things look so good for the real estate market recently is because they have been so gawd-awful for the past 2 years. Real estate equity has taken a huge hit since the fall of ’07. Values have dropped generally from 25 to 30% which translate into much higher drops in equity when you consider that most properties are highly leveraged by financing. Articles that paint the picture that everything is wonderful in real estate seem to summarily dismiss the pain and suffering that property owners have felt as a result of that hit. Granted, for many property owners, the equity loss has been just paper. But there are still many others who have felt the real sting of invested dollars that have simply evaporated… and they’re not going to return soon enough. It is what it is, but the resulting anxiety in the marketplace is not normal.
Have we returned to a normal real estate market? No. Have things truly stabilized? Far from it. When I contemplate the situation, I can’t help but think about the game that my kids recently downloaded onto my I-Pod Touch (I-Phone w/o the phone) called Super Monkey Ball. The basic premise of the game is to keep a rolling ball from falling off the edge of a flat surface by making quick adjustments to the position of the I-pod Touch. The game is really hard because every adjustment you make requires a counter adjustment to keep the ball on the surface. What a great analogy for our economy. The government seems to be playing a dangerous game of Super Monkey Ball, but it does create some big opportunities if you have some risk tolerance.
The adjustments made to the economy to stimulate the real estate market have been fairly extreme. Yes, the tax credit and artificially low interest rates have had a ripple effect on most price points and there’s no question that they have stimulated sales in the recent months. But I can’t help but wonder about the eventual counter adjustments. When? What? To what extent? I wish I could answer those questions. Arguably, the real estate market will have stabilized when it no longer needs tax credits to stimulate sales, when rates are no longer artificially low or high, and when private money comes back into both the residential and commercial markets. A good sign that we have returned to a normal market is when someone else besides the government is buying mortgage backed securities…. AND sales activity remains relatively constant. Until then, welcome to real estate Super Monkey Ball.
All this is telling me that if you’re in a position to do so, now is a great time to be buying real estate. That’s where the real estate Super Monkey Ball is rolling right now. There’s a window of opportunity that is only likely to last thru April of 2010. After that, the tax credit will go away and rates will probably rise dramatically. Windows of opportunity like this just don’t come along too often. Getting into position to buy property may take some doing, but I think you’d look back and say it was worth it.
Now more than ever, for most people, it makes sense to work with a good real estate agent. I know that sounds self serving, but even if I wasn’t in real estate, the information “noise” factor would lead me to that conclusion. While it’s all accessible and transparent, the amount of ever-changing real estate information is simply deafening … ok, over stimulating… unless you’re on top of it every day. In the absence of good counseling and interpretation, it is nearly impossible to make a real estate decision without second guessing yourself. That uncertainty can be extremely unnerving. I’ve got to think that most people do not want to go through that. The opportunities are out there if you know what you’re doing, but it’s easy to make a mistake too. Part of a real estate agent’s job is to sift through the noise and guide you to the conclusion, with absolute certainty and clarity that the real estate decisions you’re making are the right ones for you.
