My One Hundred Things: Who Cares if Real Estate Has Bottomed?

I get questions about this every day, so I thought it would be a good idea to write about it for a minute. I try to keep up on the financial market a bit, and there’s a lot of talk in that area about real estate as well, not surprisingly. So where do we stand, and how should we behaving right now?

First I don’t believe the economy is going to get “back to normal” in our lifetime. Wow, what a negative thing to say, right? Hear me out…I say this because what most of us seem to consider “normal” is not, in fact, normal at all.

In Lafayette Indiana, where I practice real estate, price values are stable, but lending is on it’s ear. Real estate investing is at a near standstill (from a purely local viewpoint anyway). Some Realtors I talk to are wondering if they’re going to make money in real estate ever again. Banks are simply not doing 100% loans and throwing money around like they used to. In other areas that are experiencing sharp price declines, lending is in the same boat. It’s locked up unless you have good credit and some money to put down. The irony is that this is the way (more or less) that real estate has always been. Home sales, compared to history, are not really that soft at all. We just consider them soft because money has been so loose over the past several years. Yes, home sales are down considerably right now, but grading on a historic curve, they are just fine. Believe it or not, in Lafayette Indiana, real estate is back to normal now…the real normal, where buying a home requires reasonable credit, a good job and a down payment.

This is not meant to detract from what’s happening in other areas…people are losing jobs and many others are wondering when they’re going to get the axe. It’s not a fun time in the job market, and this translates to softening real estate sales as well. It is strong evidence that while property may have been the straw that broke the camels back and precipitated the downturn, it certainly was not the cause of it. The underlying issue of our recession was loose money to begin with. If money had not been manipulated the way it was…guess what, all the NINJA (no income, no job, no asset) loans and other fantastic, genius financial instruments we came up with never would have been possible. You can’t leave a box of candy in a room full of kindergardeners and expect them not to go berserk, to paraphrase Peter Schiff.

That said, there’s enough blame to go around. It’s really not the point. I don’t blame guys like Bernanke for making collosal mistakes. It happens. But when it happens, step up and hold yourself accountable.

Anyway, has real estate bottomed? I don’t have a crystal ball. But here’s what I can say: I honestly am not concerned with it. Playing the changes as they occur are why I’m in business. Learning to adapt is how you create value for clients. Not just cashing in when things are “hot”. So whether the market is up or down, people need to live somewhere, and they need to move on occassion. This is why Realtors are in business…or at least why they SHOULD be in business…to help. Not to “close”. Not to “sell”. Yes, you have to get closings to survive in business. This is true in any business. And in any business you can find people who bottom feed, and those people come and go. You can also find people in any industry who are the real deal.

A market downturn cleanses the system of bottomfeeders. This is a good thing. This real estate market may be down for a while. Do you have a problem with affordable housing? I don’t. Do you have a problem with very affordable housing? Me neither.

Here’s the way I see it panning out: we’re in a massive mess, period. A massive mess is very hard work to clean up, period. The longer we’re down, the more painful it will be in the present, and the better it will be for us in the long term. I don’t know where we’ll find equilibrium. All I know is that wherever we find it, and whatever road we take to get there…there is ample opportunity for us all. Realtors…real professionals that is, are needed now more than ever.

Who cares if real estate has bottomed? There is a lot of work to be done either way. If you look back at the “good ole days” of real estate and think of it not as “hot” but rather “making a huge mess that’s gonna be killer painful to clean up later”, perhaps it just wasn’t as cool as we thought it was. Thoughts?

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