Saturday, October 04, 2008

The Only Thing we Have to Fear is Fear Itself

Americans seem to have short term memory loss. Do you remember when, after the attacks on 9/11, many of us feared that the world as we knew it was coming to an end? Those same sentiments abounded in October 1987 after the Stock Market Crash, and of course Franklin D. Roosevelt (who coined the phrase) understood it after the attack on Pearl Harbor.

What strikes me is that we often lose sight of the big picture, and we have to keep that in mind when looking at real estate. When values were increasing by huge leaps and bounds over the past decade, why didn't we say 'this is not sustainable'? I often shook my head as homes sold for well over their asking price, and I must confess that though I did have those thoughts I felt helpless to do anything about it. As a seller's agent it benefited the owners that I represented. As a buyer's agent I always tried to explain to my buyers that it was important not to be carried away by frills, and to remember that real estate is always about location. It is always about fundamentals, not about using fear to motivate, for lest we forget, for every action there is always an equal and opposite reaction.

We have now seen buyers and sellers reverse roles, with buyers having unreasonable expectations much as sellers had them in the past.
We now have the opportunity to speak to both buyers and sellers about the long term benefits of owning a home and point to long term statistics, and to remind them that we are returning to 'normalcy'. On average homes will appreciate about 5% per year. Sometimes this will be ahead of the stock market and sometimes not. Throughout the time that we own our homes we will not only have mortgage interest deductions but will be able to enjoy the pleasures of Thanksgiving and Christmas dinners, special family events, entertaining guests, and the simple pleasures of watching our trees and gardens grow.

Now that we have a new law passed that will help to calm some of those fears, let's not lose sight of the fundamentals.

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Blogger Matt Isleib said...

I could not agree with you more. Short term memory is an understatement. And although the writing was on the wall that with loose lending we were heading for a bumpy road, I do not think that anyone could have foreseen it to this extent. Hopefully going forward with lending more realistic and based upon a borrowers fundamentals in due time we can work through the current inventory of homes if Ffld county and look toward the future of a more stable housing market. One that is stable and not inflated on stupidity.

1:16 PM  
Blogger Richard said...

I think we are passing the fear phase and heading to capitulation. There is a lot of money going into the system and it is going to come out in liquidity to buy real estate. We will rise up the wall of worry out of the depths of this recession.

5:13 PM  
Blogger Matt Isleib said...

I agree the capital injection is massive. If the Fed can get the money printed they will shell it out. I have seen a substantial increase in activity of new buyers. With rates breaking through 5.00% and the 8K first time home buyer credit I have seen a lot of buyers who were on the sidelines starting to dip their toe.

My concern is working through all the bank owned and foreclosure inventory. Until that inventory is worked through it will continue to keep home values declining. Your thoughts?

6:58 PM  
Blogger kanishk said...

Hopefully going forward with lending more realistic and based upon a borrowers fundamentals in due time we can work through the current inventory of homes
Antalya Homes Construction

2:46 AM  

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