What’s your housing shtick?

It’s easy to fall into the trap of saying one thing about the housing market. Just as a comedian has a shtick, or regular performance, we can get into the routine of talking about real estate based on one big idea about what the market is doing or will do. Let’s consider some examples. Which one(s) are you? Any thoughts?

37841087 - overhead of office table with notebook, computer keyboard and mouse, tablet pc and smartphone. copy space

Doom & Gloom:  The market is going to crash like it did 10 years ago.

Corrector:  Values will correct but not implode.  

One-Metric Wonder: The market will turn as soon as this one thing happens.

Normal: The market is normal and not in a “bubble”.

Mr. Buzzword: The market is headed toward a “shift” in the future.

Polly Pollyanna: It’s always a good time to buy and sell. Everything is always good.

Specific Year Guy: This year is going to be the one where values turn.

Mrs. Cyclepants: The market has a 7 year cycle and it’s about up.

Foreclosure Prophet: Another foreclosure wave is coming. Just wait.

Headline Regurgitator: This person says whatever the latest headlines say.

Spinster: Any negative aspect of housing is spun into something positive.

The Feeler: I feel like the market is strong and will be in the future.

Crystal Ball: This is exactly what the market is going to do.

Broken Crystal Ball: Nobody knows the future including me.

If we’re honest we might identify with several shticks above. That’s okay. I’m not saying there’s something wrong with that, but let’s be challenged to consider what we say and not get locked into conveying only one thing about the complex housing market. Moreover, let’s be cautious about imposing clichés and ideas on the market because it’s easy to miss trends that way. At the same time let’s not be naive by refusing to consider the future. My advice? Pay attention to the numbers and know them well enough to quote, know what is normal and not for the time of year, remember that values might be moving differently in various price ranges and neighborhoods, and find ways to talk about current values in specific terms while keeping an eye on the future (instead of focusing entirely on the future).

My knee & market update post: Some of you may know I hurt my knee in a snow tubing accident 10 days ago. I have an MRI next week, but for now the doctor thinks I may have torn my meniscus. Anyway, I normally do my big market update between the 10th and 15th of the month, but I can’t swing it this week since I took last week off and I’m basically playing catch-up with all my reports this week. I’m just grateful to be at my desk again. Anyway, I will be 100% up and running (not literally) next week, and I’ll get to my big update then. Thanks for your understanding.

Questions: Which shtick stands out to you most? Any others to add? Did I miss something? I’d love to hear your take.

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Comments

  1. says

    2007 vs 2017: In 2007 barista buys 2 homes zero down vs 2017 baristas bunk 2/room with 1/2 their income…

    My apologies to hard working baristas, but my reference is to all the otherwise unqualified buyers in the 2005-2007 time period who bought homes using false income data, enabled by lenders, large money center banks and Standard and Poors… it was a ponzi scheme.

    • says

      Nail on head about the baristas and other buyers who were often only able to “afford” higher prices because of lies and creativity on the part of the bank and others. You are so right about the current state of sharing rent too. It’s frankly easy to target young people and speak down to them, but the truth is we’ve had very limited wage growth and this upcoming generation faces more financial obstacles compared to generations in the past (student debt, astronomical healthcare, increasing values and rents, stagnant wage growth, etc….).

    • says

      Thanks John. If anything, I like to say my crystal ball is broken. Yet I explain the current trends in depth and have an eye on the future. I’m just humble about my ability to predict the market. I really don’t have a crystal ball. 🙂

      • says

        Follow-up. I’d say I like to stick to the facts and let the numbers speak as much as possible as opposed to resting on a cliche or certain statement to adequately describe the market (Joe prodded me on Twitter about this).

  2. says

    Call me, Mr. Cyclepants Corrector. Very creative post. To add to the list, you could have the people who tie everything good or bad, depending on persuasion, to Trump or Obama. What would they be called?

    • says

      That’s great Gary. Thanks. Excellent addition here. There are people who think Trump or other figures will be market saviors to a certain extent. Thus Trump will repeal Dodd-Frank and move the market and….. I’m not sure what the title should be, but maybe something like, “POTUS Power”. Anyone have anything better?

  3. says

    Good post, been wondering when someone would jump off the cliff with a prediction. Rent/mortgage affordability seems to be at max barring growth in wages or lowered interest rates. Based on history a correction is in order…..

    • says

      Thanks Mark. Lots of people “jump off the cliff” and maybe some will in the comments (anyone?). Last year the author of Rich Dad Poor Dad said 2016 was the magic year in which the market would turn (http://www.marketwatch.com/story/rich-dad-author-says-the-market-collapse-he-foresaw-in-2002-is-coming-2016-03-23). Oops, that didn’t happen. On a smaller level many real estate professionals on Facebook have made predictions and talked about the market having shifted. These types of predictions are particularly pronounced when the hot spring market fades and fall ensues. My sense is the real estate community has at times misinterpreted a seasonal cooling for declining values. Ever since the market slowed after institutional cash investors left in 2012/2013 (in Sacramento at least), we’ve had four straight years of “The Bubble is here” conversations as soon as the seasonal market slows. The thing is at some point the market will turn because markets go up and down, and then that person saying the market has “shifted” is going to look like a housing genius, get a book deal, get a verified status on Twitter, etc…. despite having made an incorrect prediction for many years prior. 🙂

      This is not to gloss over the market and inflated values right now as I believe values have been artificially inflated for years due to anemic inventory and historically low interest rates. I’m only saying this is a layer of the conversation to sift through. I’m intrigued by these conversations and they always leave me with a sense of respect for the market. I am always reminded too that there is no formula for a real estate bubble. It does not have to build the same way or pop the same way as it did previously either. That is the most challenging part. If history repeated itself exactly the same each time, it sure would be easier to interpret the context which we are in.

      Thoughts anyone? This is THE conversation, no?

  4. says

    Good schtick about the schtick. Personally, if I am in front of a computer I go here https://www.zillow.com/home-values/ and type in the zip code of the property and read whoever is asking about the market the data and trends right off the web page (which I also include in the report for context). I explain “all real estate is local” and this is the trend for “yours”. I don’t generally like Zillow for individual home values but the statistical data is OK.

    • says

      Thanks Mike. I appreciate your thoughts. You are so right that real estate IS local. There can be several markets within a neighborhood too. I appreciate the link too. It’s amazing how much data can be at our disposal in just seconds. I’d be curious to hear from others what they find when typing in their zip code. I actually tried my zip code and it was good to see values rose less than 5% last year. So many people are saying how crazy appreciation rates have been, but my sense is the market feels more aggressive than actual appreciation rates at times.

      Speaking of Zillow I had a lawyer the other day ask me to respond to a home owner because the Zestimate was 10% higher than the appraised value. These days we have to pay attention to Zillow or at least respond to it.

      Thanks again Mike.

  5. says

    Holy smokes – you always crack me up, even when educating and entertaining the world. What word craft and wit you have. <3 Higher price points are having some challenges with showings and traffic, pre-Easter. Rain won't slow down folks getting to a home they know is right, but it will slow down traffic in general.

    I am a truth speaker, if you're a move-up buyer … roll with it. I probably wouldn't be a new buyer right now unless the home is perfect. I'm definitely a "no b.s." lady.

    Seeing an incredible volume of specifically San Jose buyers in our area. Fascinating stuff, and I'm not alone in my office – because many of us are talking about it.

    Watching DOM would be an effective tool in this market, to revisit older listings that might have some wiggle room for a lower offer or maybe the photos stunk and your buyer went past it. Many sellers state they don't have to sell, so they won't be your candidate, but can't know that till you try. Repeatedly hearing success from agents in our office, where they're looking at old listings with a new set of eyes.

    On a real estate marketing girl note of this past Fall and Spring, the beautiful awesomeness of having rain again, the downside … I have never had to reschedule so many ******* photoshoots in my life. My sellers are going to choke me, but heck if I'm going to have gray skies in my photos. Newer agents – beware, everyone is watching the weather and scheduling.

    • says

      You are awesome. Thanks Heather. I always appreciate your take on things. That’s interesting to hear about San Jose. Often people will say things like, “Bay Area buyers are here”, but hearing a specific location intrigues me. Are they here to live or invest? That’s the question in my mind.

      Part of the struggle with low inventory in today’s market is directly tied to the previous real estate bubble and crash. Investors bought up the market when so many buyers literally were unable to qualify for a loan or think about buying. Then in 2012 and 2013 we had institutional investment funds playing our market. There are surely other factors too such as less new construction, but investors have played an enormous role in our market in recent years, and when I see low inventory now, I’m reminded of their presence (even if they are not buying like they were at the height of the market in 2012/2013).

      • says

        I forgot to type (forgive me) … I’m so sorry about your injury. Being self-employed doesn’t always play kind to those of us that don’t have guaranteed paychecks … so healing thoughts to you, and thanks for being so generous with your wisdom, always. You’re a treasure to our industry!

        • says

          Thanks Heather. I appreciate it very much. It’s never fun to say goodbye to income for a couple weeks. This is when that nice steady government job with paid time off starts to sound appealing… One of the difficulties of being self-employed is it’s all up to us. Such is life though. I’m just grateful to be back fully next week and to be strong mentally for this week as I type reports. I’ll still hobble like an old man when measuring houses in coming time, but I’m just thankful to be able to work. It’s nice to couch it for a day, but a lifestyle of 24/7 Netflix just isn’t for me. ON the positive side though I think I’m all caught up on movies though…. 🙂

  6. says

    Ryan, first let me say that I hope your knee recovers soon and everything gets well quickly. Between you and Dustin you guys should probably stay off the slopes…

    This post made me laugh, and I appreciated the light-hearted post as a shift in tone. People are CONSTANTLY asking us appraisers “what is the market going to do?” It’s kinda obnoxious because anyone that knows anything about appraisers should know that we’re much better at researching the past than forecasting the future. Not that forecasting isn’t part of our job, but in most market value assignments it’s not our main objective. I too am a Crystal Ball is Broken type of person. My (probably annoying) response is “it depends”, or “I’m not sure”, or “we’ll have to wait and see”.

    Get better soon brother!

    • says

      Thanks Jacob. I appreciate it. I didn’t realize Dustin got hurt. That’s too bad to hear. I’m definitely not the spring chicken I used to be, and I’m finally starting to realize that…. I think.

      We are obsessed with the future, yet the irony is nobody can predict it. This is why I tend to choose my words very carefully about market predictions because I am not a prophet and I don’t have the ability to tell the future. I think many real estate professionals take a different stance and speak with conviction about specific predictions. That’s fine with me if it’s fine with them. Let’s just pause though and look back to the most recent presidential election. The BEST political pundits predicted Clinton would win, yet Trump did. The BEST political minds were utterly stunned on national TV on the night of the election. The BEST minds ate humble pie because despite being immersed in politics every single day of their professional lives they were completely wrong. By the way, this is just an example and it’s not a pro-Trump or Clinton statement by any stretch. The same holds true in real estate as it’s very easy to be wrong when we are predicting something (the future) that has not happened yet. This is why we ought to exercise humility when it comes to predictions. This doesn’t mean we take a “Polly Pollyanna” view of things, spin negative news, or refuse to talk about values being artificially inflated from historically low rates and investors for 5 years. The truth is the economy and wage growth have not been the main factor in driving the market – yet values have continued to rise. We all know this. Everyone does. It’s just when it comes to making specific predictions about the future we know our place is rooted in today rather than tomorrow so to speak.

      I would love for others to pitch in on this specific thread. Let’s talk it out.

  7. says

    I guess I would fall under the category of Mr. CyclePants:

    When clients ask me where we are in the real estate market right now, I usually refer to the 18 year real estate cycle:

    https://www.cato.org/publications/commentary/great-18year-real-estate-cycle

    http://www.theepochtimes.com/n3/2000510-economists-explain-why-our-economy-crashes-every-18-years/

    I tell them that peaks in land value tend to follow a pattern of highs every 18 years, and that the previous peak prior to 2006 was 1989.

    BUT – then I share the metaphor that trying to predict the real estate market is like driving your car at night… you can only see as far as the headlights (1-2 years). Beyond that the picture gets really fuzzy and the crystal ball becomes completely useless.

    We know the final destination (a peak or bottom, depending on your attitude and goals), but along the way there can be all sorts of detours and shortcuts that affect the time for us to reach it.

    So, I tell people that the 18 year cycle would place the next peak in land value somewhere around 2022-2024, with the next bottom being roughly 3-4 years after that.

    When this conversation is with a client who is wondering if they should buy now or wait a couple years, I definitely recommend that they purchase now since home prices will be higher in a couple years and interest rates will be too. Beyond that, it’s too hard to see the future… but you might be waiting a reaaaaalllly long time for the next bottom to come around, and that’s a long time to continue renting and paying off somebody else’s mortgage when you could’ve been paying your own.

    P.S.

    Hope you feel better soon!

    • says

      Thank you Mr. Cyclepants. 🙂 I appreciate your take as always Wes. I like your analogy too about driving at night. We really can only see just a bit in front of us and that’s it.

      It seems everyone wants to buy at the low end of the market, but few people actually pull that off. In fact, most people I talk to who bought in late 2011 or early 2012 admit it was plain luck instead of strategy and planning. Thus I always remind people that buying isn’t just about value – it’s also about lifestyle. Granted, this doesn’t mean it’s worth it to pull the trigger. I just think we have to remember there is more than just value we are considering. Sometimes people need to get their kids in a certain school district, downsize, move for a job, etc… When buying it’s important to sift through all the decisions. It’s not easy in today’s market of course to look at values in 2012 and consider how different they are now. But that’s how it is for now.

      • Nathan says

        This is so true. I’m an appraiser and was an appraiser in 2011 when I bought my first home in East Sac. It was 100% luck and had nothing to do with seeing a bottom of the market. Work was so scare that my office cut back my hours to 20 a week and I could just barely afford a home.

        The sad part is that many starter homes were being bought up by institutional investors at that time too.

        • says

          Well Nathan, you bought at a great time. Ha. I’m happy for you. When we see those East Sac graphs, they sure were lower in 2011.

          I actually really appreciate your comment because I think it perfectly contextualizes what we are talking about in this thread. Real estate isn’t just about equity and timing a market perfectly because few people actually pull that off.

  8. says

    Great post, Ryan. I would hope that as appraisers we are none of these descriptions since they tend to box us in about what the market is doing. As you and others have already said, the market is so fluid you really cannot categorize it a particular way. While there are overall trends, we really have to look at the latest numbers to comment on what is happening in a particular neighborhood. Glad to hear your knee is doing better.

    • says

      Thank you Tom. I guess we can ask ourselves what statements like this we see on Facebook from various real estate professionals. I’m not saying it’s wrong to use them, but it is easy to fall into the trap and essentially package the market under the umbrella of one main idea about how we things will unfold. That can be dangerous and certainly hamper with objectivity too.

      Thanks about the knee. I still cannot bend it straight, but that may be some time. I’m just grateful to be fully back this week to inspecting properties.

  9. says

    I guess I’m Doom & Gloom! ;)) Housing just seems so expensive right now and continues to rise…I feel like the only way to bring prices down is a crash…although, I always hope I’m wrong! 😉

    I hope you’re knee is on a quick mend Ryan!! Good luck!!

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