As I read the Inman News letter to editor written by Professor Erik Gartzke regarding Dian Hymer’s article ‘Is Buying Home a good investment” I heard the popping sound of a can of worms being opened. Yesterday, as I read through the Inman Blog (excerpted below) I saw the worms wriggling out:
"Dian Hymer stated that, buying a home is a good investment if, a) you can afford it, b) if are ready to put down roots in a community, c) If you want to invest in your personal happiness.
Her premise is if you’re planting roots and becoming part of a community, you’ll inevitably swing though up and down cycles. Over the long term, historically, the home will appreciate."
The good professor disagreed. Violently. He believes now is a historically bad time to buy and took Dian to task in blatant disregard of her expertise. Follow up posts by agents and non-agents clearly indicate the line being drawn in the sand – agent opinion on one side, consumer opinion on the other.
It doesn’t begin or end here. Numerous articles, studies and voices are exposing the fissures in the solid ground of trust real estate once stood upon. So what’s at the root of all this?
Could it have anything to do with the gold rush of recruiting that has taken place over the last 10 years, which exposed homeowners to hundreds of thousands of uneducated and inexperienced practitioners?
Could it have anything to do the unregulated self-promotion that allows anyone with a license to call themselves an “expert”?
Could this have anything to do with the decay of the professional real estate press?
Could it be that the ethics card — the premise NAR rests its entire marketing hat on — seems hollow?
In my local paper this weekend, over a dozen agents advertised themselves as the # 1 listing agent for the month of October. I know I can’t be the only one who looked at that and wondered how that could be.
When professionals like Dian who actually have credibility are treated with such insolence, maybe it’s time to sit up, take notice and ask some hard questions.
Do consumers trust real estate agents?
Is buying a really home a good investment today?
Why?
As I leave for NAR and prepare walk the convention floor along with the people tasked with brokering our most precious possessions, I’m hoping that I can come back and report that amid the hoopla, there’s deep attention to these issues and can isolate who among the millions in real estate are offering consumers something that doesn’t draw fire.
- Davison
Sign up for the 1000watt Spotlight e-newsletter
and keep up with the ideas, apps and people that are changing real estate.
20 Tools to Bring your Real Estate Business to the Cloud
A mist of difference
Freaking...
Marc,
It's not hard to see why there is such a great divide. Home buyers relentlessly bought during the boom years at the urging of real estate agents, big media and friends/family. Now that they've seen the fallout they are noticeably p'od and some probably feel swindled because their homes are worth less than what they paid. This backlash will continue for the foreseeable future as people look for someone to blame about the house they paid too much for and the way the market has changed so drastically. Everyone is responsible for the market today including every agent who didn't bother negotiating for their buyers (my clients rarely ever paid asking price — even during the boom years), mortgage brokers who selfishly tied subprime borrowers into ticking time bomb loans, the big media corps who created a hysteria over real estate and urged everyone to get in before it's too late and lastly, the home buyers for buying when they weren't prepared. The greatest loss in recent American history is the loss of self accountability. Do your research and learn the basics of the real estate industry (real estate and mortgages) before jumping head first into something the media hypes as being a never-again opportunity. $20 and a few days of reading would have saved today's homeowners millions.
Well done Joshua. The consumer absolutely needs to educate themselves. I think they are trying, but it's tough to weed through the muck of opinions to find fact.
Watch the Inman interview with Dale Stinton and you'll see how real estate vehemently pushes the notion that the agent, first and foremost, is the trusted advisor – a campaign that was so successful the American public bought it hook, line and sinker.
It's time that NAR as well as real estate as a whole start telling the truth. The truth that not every Realtor is an expert. That not every agent is ethical. That unless the home is priced right it will sit for 10 months. That you should never spend more than you can afford under any circumstances because no one has a crystal ball.
More voices like yours need to form a chorus and get spun into an awareness campaigns. More destinations need to be publicized that provide top quality, decision support built on fact not opinion or fiction.
I posted several honest and important selling points to my blog on Sunday as alternatives to blaming the media or claiming that this is a normal market.
There are brokers and agents who truly believe that buyers act as a group based on what they see in the media and that is hurting the market. I disagree and I cite real data like the recent article in Fortune magazine on the price/rent differential that can't be ignored or blamed on the media.
Why does organized real estate fear a much needed price correction? If you are selling real estate as a long term investment, a short term change should be irrelevent.
Your house is worth less now that it was in 2006? What difference does it make, unless you bought it as a flip? If it was worth your monthly payment as a home in 2006, it should still be worth the same payment today.
If real estate is a good long term investment, which I still believe it is, then a short term price correction simply makes it an ever better investment and brings more buyers to the table.
As an anecdote, a duplex in my neighborhood listed and sold after multiple offers in less than 30 days. Why didn't negative media coverage kill that deal? Because it was priced right.
Industry leaders are fighting a losing battle and, as Marc points out, damaging the credibility of the organizations they represent in the process.
Negative spin didn't create this market, positive spin won't change this market. Price is still the problem that fixes most other problems.
"There are brokers and agents who truly believe that buyers act as a group based on what they see in the media and that is hurting the market."
I think it serves both of our points to separate the buying public as general buyers and flippers. General buyers who bought homes because they had a need for shelter did not hurt the market but they did listen to the media (as we all do). Why else would so many people have a hard time believing their home is no longer appreciating at $25K-$50K per year? After all, real estate was hot and unstoppable! How did they come to this conclusion? Rah-rah media. Flippers jumped in on the market to take advantage of the home price appreciation. There have always been flippers but I don't think there have ever been as many as we had during the most recent boom. The extra flippers who came out of the woodwork: They believed every word of the media's positive press.
"Your house is worth less now that it was in 2006? What difference does it make, unless you bought it as a flip? If it was worth your monthly payment as a home in 2006, it should still be worth the same payment today."
My personal take on the market is the major shift happened in late 2005 – early 2006 when the market started to decelerate rapidly and flippers panicked. There are a lot of reasons why a homeowner would be upset about their home being worth less: They must sell the house and relocate quickly but similar homes in the neighborhood are now priced $50,000 under what they owe on their mortgage is one of the most common. Another reason would be the predatory lending that happened during the boom years. Self-accountability aside, many buyers did a free fall into unfavorable ARM loans that thrust their monthly payment into the stratosphere. Now people have to move before they are foreclosed on but cannot sell the house for what they owe on it.
"If real estate is a good long term investment, which I still believe it is, then a short term price correction simply makes it an ever better investment and brings more buyers to the table."
I agree with you that real estate is a great long term investment and that you do make the most money on a home when you buy it. The short term price correction however is not a rosy outlook because it's being accompanied by a major mortgage industry fallout (ARM backlash) and a lot of bad press. Under more normal circumstances this type of market WOULD be very ideal for a home buyer — unless they now can't obtain financing because their credit is just slightly above subprime or in subprime altogether.
"As an anecdote, a duplex in my neighborhood listed and sold after multiple offers in less than 30 days. Why didn't negative media coverage kill that deal? Because it was priced right."
Homes are still selling. Really, really well priced homes are still selling quite well. The trouble with today's market is with many homeowners who bought between 2003-2006 who now owe more than their homes are worth. Also, convincing a homeowner than their home is no longer worth the $575,000 it was worth three years ago is no easy feat. Buyers are also afraid to enter the market because they don't want to get caught owning something that will be worth less than what they paid for it.
"Industry leaders are fighting a losing battle and, as Marc points out, damaging the credibility of the organizations they represent in the process."
I agree 100%. NAR needs to get out of the rah rah mode and get to work on educating their members on real estate, financing and other relevant issues that will better prepare them to deal with real estate matters.
"Negative spin didn't create this market, positive spin won't change this market. Price is still the problem that fixes most other problems."
I will not concede that the media is, in some part, responsible for the hysteria that surrounds real estate over the past 8 years. They have covered it so thoroughly that it's now a household topic. Everyone knows about it and talks about it. I will, however, admit that what the media has done is exactly what they are there to do. They cover hot topics, both positive and negative, that are affecting the country at large. But the problem areas in today's real estate market are vast and stretch far beyond home pricing to include the subprime mortgage fallout and even consumable goods will feel the wrath of the real estate market before this is all over. During the boom years the U.S. had homeowners spending their home equity as a free ticket to the American Dream with no end in sight. Being a homeowner meant becoming a near millionaire (practically) overnight and everyone wanted a piece of the action. Without all that equity how will people pay for cars, luxury kitchens and expensive private schools? All of the spending of home equity has guaranteed one thing: People will not be able to sell their homes for what they owe on the mortgage. Our lack of self-accountability might be finally coming back to haunt us.
Marc, Great Post.
I am the Technology guy for The Greater Tampa Bay Real Estate -BLOG
I wrote an article/post on November 9, 2007 regarding this article.
Is now the right time to buy your Florida home ?
I like your Hatfield and McCoy’s analogy and think it hit it right on.
B.T.W. I am a frequent visitor to your site. I like yours and Brian’s writing style and insight.
My wife is the Realtor in the family, and I am former VP of IT for a National Internet Based Real Estate Firm,
Now working on my own project in the Video segment of the Social Networks arena. Just trying to help my wife and her partner out
and see where I can use my experience and expertise to make a useful tool in the arsenal.
Right now I am spending a lot of time reading and visiting great sites like yours to better understand the people and processes.
V/r
Tom Townsend
New Media Guru
Virtual Interactive Systems
New Port Richey, Florida
Tom,
Nice to see a fellow ex-NHR person out there, still in the business (sort of).
I posted several honest and important selling points to my blog on Sunday as alternatives to blaming the media or claiming that this is a normal market.
There are brokers and agents who truly believe that buyers act as a group based on what they see in the media and that is hurting the market. I disagree and I cite real data like the recent article in Fortune magazine on the price/rent differential that can't be ignored or blamed on the media.
Why does organized real estate fear a much needed price correction? If you are selling real estate as a long term investment, a short term change should be irrelevent.
Your house is worth less now that it was in 2006? What difference does it make, unless you bought it as a flip? If it was worth your monthly payment as a home in 2006, it should still be worth the same payment today.
If real estate is a good long term investment, which I still believe it is, then a short term price correction simply makes it an ever better investment and brings more buyers to the table.
As an anecdote, a duplex in my neighborhood listed and sold after multiple offers in less than 30 days. Why didn't negative media coverage kill that deal? Because it was priced right.
Industry leaders are fighting a losing battle and, as Marc points out, damaging the credibility of the organizations they represent in the process.
Negative spin didn't create this market, positive spin won't change this market. Price is still the problem that fixes most other problems.