What’s the most common refrain anyone working in real estate hears these days? That’s easy. “ I can’t wait until everything gets back to normal.”
Screech. Whoa. Stop right there.
Normal? What’s normal? What does it look like again? Would we even recognize normal if it jumped up and bit us in the collective behind while we were busy gazing towards the horizon, pining for its return?
I confess there’s part of me – not the better angel part – that hears the word normal and instantly imagines a rosey-colored-glasses version of the market circa 2005. I suspect I’m not the only one with flawed vision. You know, lots of supply and demand, tons of transactions and a median price streaking towards $800k!! All without the aid of subprime loans, credit default swaps or a heapin’ helpin’ of irrational exuberance.
Dream on. I usually settle back to earth, tempered by my real experience of the past four years. Reminding myself how crazy that craziness was. And I usually throw this question out to the universe: “If we knew then what we know now…would anyone have thought that real estate was anywhere close to normal?”
Is it even remotely possible to get back to an 800k median price without finding a new way to give everyone lots of debt disguised as free money while convincing them to buy into the notion that home is just another name for a cash cowabungalow?
I think I’m ready to start over. Search for a new story about the marketplace. A new definition of normal.
When I close my eyes to paint my fantasy landscape of “new” normal, I always start with a healthy tension between buyers and sellers. Relative balance between supply and demand. Very different from today’s market. Both sides feel comfortable being there. Doing business. Making life transitions. There are willing buyers and there are willing sellers in the new normal. Right now, neither buyers nor sellers are particularly comfortable.
I read the front page article in the Sentinel yesterday to see if there might be a new story starting to emerge there. I’m cringing a little as I read it again.
That’s not anyone’s fault. Real estate is a complicated thing. Select a headline. Call five agents. Get some quotes. String ‘em together with a few metrics.
But I always want to add an extra appendix onto the end to flush out the nuances and hidden meanings. I’m never sure it’s news the average person can use without a lot more translation.
Headline: County Home Sales Jump! There’s the hook. A nod to Sellers who need to believe in 2005. And a prod to Buyers. Oh-oh, prices going up. Time to buy.”
Real estate is treading a fine line. Parsing perspectives. Playing both sides. Trying to encourage more buyers and sellers at the same time. Get more people off the fence, moving in eachother’s direction.
The message in yesterday’s piece? Things are bouncing, not jumping. The market is going up and down simultaneously. When prices fall enough, multiple offers ensue. And there are lots of multiple offers – which isn’t supposed to happen in a “buyers” market.
When prices fall, the inventory shrinks, because most sellers don’t want to sell unless they have to. If more sellers would just put their properties on at lower prices, they’d have multiple offers too. Because more buyers would buy. Except if too many put them on. Then the inventory would be too high.
Seems like we need more or less inventory at the same time. More or less buyers, sellers and listings.
Why so much confusion? Blame the elephant in the market. Distress sales. People talk about them like they’re normal. Question: Can we intelligently assess a marketplace where 40% of the sales (70% condos) are distressed? Involving institutions rather than individuals? This is a significant deviation from anything we’ve known in past markets.
Do distress sales fit the definition of fair market value – willing buyers, wiling sellers? Aren’t they fundamentally different? Can we apply the same laws of supply and demand when analyzing data like prices, volume of sales and the unsold inventory index? Can a new normal emerge in an era defined by short sales and REOs. Before the pendulum stops swinging backward?