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HOW ARE ECONOMIC STATISTICS REPORTED? I BELIEVE THERE IS A NEW ECONOMIC PARADIGM.

* * * * HARD CORE REAL ESTATE TALK * * * *

I seem to recall reading somewhere about 3 months ago that the administration was forecasting growth in of the U.S. economy of 4%. Since that time, I've read the same predictions from several "authoritive sources". Whenever I see such a prediction, I can merely say to myself. . how???

BE PREPARED! I also believe that a lot of folks simply believe that if we expect good things to happen, good things will happen. I believe that we real estate practitioners need to look at facts and figures and not rely on "feelings". The Boy Scouts are the authorities here with "BE PREPARED". In many ways, survival in the real estate business today is like wilderness survival. If real estate practitioners are prepared, we will survive this market catastrophe in far better shape than if we simply stand by and wish for the best.

Michael Mussa, senior fellow at PIIE and former chief economist at the International Monetary Fund (IMF), predicts that real GDP growth in the world will be 4.2 percent in 2010 over 2009, and real GDP growth in the United States will be 4.0 percent from the middle of 2009 through the end of next year. . . MORE. . .

These folks remind me of the real estate prognosticators who continue to claim that the real estate market has "bottomed".

Not everyone agrees. The Congressional Budget Office, staffed by a cabal of truth seekers and radicals who continue to confound the President of the United States with facts and figures, projects a gloomy 2010.

Elizabeth Warren, Chair of the Congressional Oversight Panel, a prognostigator I greatly admire for her candor and reliance on facts and figures, stated in February 2009: What effect is this recession having on the middle class? "America's middle class is at a turning point. The outcome of this recession will either be a significantly strengthened middle class--which has less debt and a stronger safety net, both on its own and through new government regulation--or the middle class we once knew will disappear. [In that case,] America will move to a two-class economy--a substantial upper class that's financially secure and then a very large underclass that lives paycheck to paycheck." . . . MORE. . .

ON FORECLOSURES, Dr. Warren has zeroed in on what I believe to be the most pernicious and generally overlooked cause of the economic decline and the likely failure of the economy to recover at the rate predicted by Congress, the White House and the NAR. Negative equity, home owners who owe more for their homes than the market value of that property has made about 20,000,000 home owners prisoners of their home mortgage and effectively removed many from the consumer market. How can the economy grow when the consumer pool is shrinking??

"Mortgage foreclosures pose a special problem. Millions of people could make market-rate payments on 30-year fixed mortgages for 100% of the current market value of their homes. But these can-pay families are driven into foreclosure because they cannot pay according to the terms of the higher-priced mortgages they now hold, and refinancing options are limited or nonexistent.". . . . MORE. . . .

HAS THE REAL ESTATE MARKET BOTTOMED? That depends on where you are located and what highs the prognosticator is using to come to the conclusion that the real estate market has "bottomed".

WHAT IS THE NEW PARADIGM? The real estate market has a BASE of about 80% of the numbers reported. What does that mean?

It means that:

the actual home buying pool is about 80% of what we think it is.
only about 80% of home owners are in a position to buy or sell.
only about 80% of home owners have sufficient equity to be able to sell with net proceeds.
only about 80% of the home owners who wish to MOVE UP are able to do so.
only about 20% of the homes purchased during 2004-2007 have positive equity.

It also means that agents and brokers who plan to survive the next several years in the real estate business will need about 20% more cash to fund overhead because the ROI could be about 20% less than in the past.

It also means that the market can only sustain about 80% of the real estate licensees who wish to make a living in real estate sales.

If you plan to survive as a real estate practitioner, don't put your head in the sand and hope for the best.

Positive thoughts don't make things happen. Hard work, planning and execution is what makes things happen.

THE NEW PARADIGM requires that real estate practitioners know the market, focus on niches that have a chance of success. If a real estate agent focuses on listing homes for sellers who desire to "move up", be careful and make sure that they have sufficient equity to finance their plans.

THE NEW PARADIGM requires that listing agents who propose to list and sell homes for relocating home owners understand that the subject property has a far lower market value than the owner believes (or "feels"). Listing agents must be tough with unrealistic sellers who believe that they should be able to sell for more than the market will pay or that appraisers will value.

THE NEW PARADIGM requires that many prospective buyer contacts are from opportunistic consumers who believe the advertising and industry rhetoric that claims real estate is easy to by without consideration of credit, cash or investment.

THE NEW PARADIGM requires that agents stay on top of changes in their market area, plan their work schedule, continue training to know the changes in the law and real estate practices, i.e. foreclosures / short sales / appraisals and more.

THE NEW PARADIGM requires that we know our business and run our business in a business like manner.

Courtesy, Lenn Harley, Broker, Homefinders.com.

Posted by Lenn Harley, Real Estate Broker, Maryland & Virginia on 09/23/2009 07:08 AM

Comments (89)

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89 Comments on HOW ARE ECONOMIC STATISTICS REPORTED? I BELIEVE THERE IS A NEW ECONOMIC PARADIGM.

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Lenn , For the most part I really appreciate this blog for the quality and substance it has. The only point I would make and you say it in your posttoo, is that predictions good and bad sometimes have a way of making the events they predict come true. So here is hoping the good predictions have more influence than the gloomier ones. I also think the recovery is still on life support and while we avert a "Great depression" we are not out of the woods yet. I see it here in this housing market

Lenn, I agree. I find the 80 per cent very interesting. And true. Even in this soft market there are tremendous oppotunities. Aren't we lucky to be in this business at this time? I truly believe this. :)

Many years ago my husband said that the middle class will disappear if things continued as they were. Things did continue as they were and we now find ourselves in the middle of this mess with what Dr. Warren (and my husband)predicted becoming a real possibility.

Lenn,

When comparing stats in the post to the piledriver bad news reports, I am delighted to see a contention that 80% of homeowners could sell with positive net proceeds.

I am so tired of hearing that nothing is selling anywhere and that everyone is losing money everywhere.

You are correct in the key is niche marketing...pick it, develop it and sell it....like 55+ communities in Florida.

Lenn - The power of positive thinking is not inconsequential, however it must be tempered with good old pragmatism. Coming off of a busy summer its easy to think things are on the upswing, but I think we must be prepared to deal with the 80% factor: keep adapting to this market in flux. Thanks for the HARD CORE REAL ESTATE!!!

Mike. Of course. There are millions of home owners who purchased their homes prior to the real estate "boom" and have positive equity. These home owners are usually quite disappointed with the price they get today, but they can still sell if they want or need to. Of course, these are not the foreclosures or short sales on the market.

Barb. I believe we have a shrinking middle class to our detriment.

Marcia. Lucky for those of us who understand the market. Not so lucky for folks who do not but just wish for the best.

Charlie. I don't believe that simply saying things are going to happen makes them happen.

Quick. Someone in the powers that be office hit the featured button. Amazing, Lenn. So many proclaiming that we've 'hit bottom", with absolutely no data that makes this a sensible conclusion (at least, in our area).

Gary. That 55+ market would be a lot better if folks up north could sell their homes and go south.

Amy. Thanks. Mmmm I'd better add that.

Lenn: excellent analysis, niche marketing, knowing that market, i.e. the people and remaining a positive facilitaor of their decisions is crucial to not just being one of the 80% who survives but to THIRVE. I'm not interested in mere survival. I believe we have a purpose to serve that brings others help, joy, and in that giving, we find a bit of the same for ourselves.

Laurie. That's my observation too. Sometimes I just wonder what they're smoking. It's those rose colored glasses.

Janice. Indeed. Survival is not the goal. Continued success surely is.

The old 80/20 really does seem to apply to everything. At our last broker/owner conference, the founder of RE/MAX, Dave Linegar, had a round table discussion with us and used a graph to show the realistic effect of the bubble in housing. I wish I had access to that graph. It did a beautiful job of demonstrating how bad our market crashed, and just how long it will take for it to come back. The message of the meeting was "buckle your seatbelt, we're in a for a long, long climb back to the top." It is unrealistic to think that we could have crashed this bad and come back in a short amount of time. It took us years to get here, and it will take us years to climb back out...and that's just to "normal" levels. We do ourselves, and our clients, a favor by recognizing this and dealing with it using a realistic viewpoint. As always, I enjoyed your post.

These times they are a changing, lots of paradym shifts.

Sitting around hoping is not going to bring your business as we have seen, more and more dinausaur Realtors are leaving.

The 20% cut in overhead is critical because as you said and I agree we work twice as hard for lower priced homes to bring home the bacon.

I love honesty, too many people are upside down to see a rebound this year. Doesn't mean we won't have a good year personally and in our individual business but those who do have made the "shift".

Good morning Lenn,

As always a voice of reason in what seems to be an unreasonable world. I do like the comment that you made, "only about 20% of the homes purchased during 2004-2007 have positive equity." I would also add to that, or refinanced, to it. There were soooo very many that were refinancing and cashing out that they too have a negative equity in their home now.

Lenn:

The disappearance of the middle class is a frightening possibility and I have read and heard that prediction in a number of places. I think the government is running scared and that's one of the reasons they are considering extending (and, possibly expanding) the home buyer tax credit. They are terrified at what might happen if it stops now.

Claudette. IMO, it's all smoke and mirrors. Sort of like a shell game. Take tax money from the many and give it to a few.

Don. Indeed. There was always the "promise" of more and more equity growth.

Missy. You are "spot on". Thanks. We are all working harder for the same income. When prices decline, just to keep up, we have to work harder. Those commission checks are smaller and smaller.

Lina. I agree with Dave's predictions completely. His is a voice of someone who knows our industry.

"Don't worry..........be happy..........don't worry..........be happy.............don't worry............be happy."

Lenn, a big reason the economy stays stuck is because of the anti-business policies ot the administration. Every major initiative holds new fees or taxes on businesses, which will be passed on to consumers, while the White House argues that there will be no middle class tax increase.

The real and perceived effect is a major drag on the economy.

Lenn, this was a Great morning read for me.....the segment about the "listing agents" is so true. I have stopped taking listings that I know won't sell at the price the owners want. I currently am carrying listings that won't sell with price reductions to meet the market.

Great post Lenn. I believe the middle class has split into the upper middle and lower, and the distance between them is growing. 20% equity in the given period is probably a fair number for our area. We are currently working with 2 buyers that will purchase regardless of if or when their first home will sell. These are obviously well to do folks, and shows the pool of qualified ready buyers is a small one indeed. A small glimmer of hope as some buyers just say "we are moving on". Alas, these buyers are few and far between, but, 6 months ago, they did not even exist....

Christine. This is a side of our industry that makes market experience so valuable. It's hard to convince owners of the true market value. Of course, if they have to sell that's one thing, but the "move-up" buyers are hard to convince.

Brian. While I believe that it goes much deeper than that, I agree completely.

Jim. HA! Careful you don't bite that tongue in your cheek.

I tend to agree with the first comment by Charlie above.

I also think the recovery is still on life support and while we avert a "Great depression" we are not out of the woods yet!

Patricia

Frank and Jodi. What I see is many consumers who "would" buy up but few who can. My last resale buyer has about 40% cash down. That was a treat. The other one this year was a Zero Down VA Loan. That's one where the higher VA limit helped me sell a home.

Lenn - there are two things here, 1) what the growth really means, and 2) the impact to the real estate business (and, as a result, the economy). Regarding the growth, if we get 4% that is good, until you consider that we are at a much lower starting point than even a year ago, after declines of .3%, 6.3%, 5.7% & 1%. Good news, but not great news. As for real estate, if it doesn't recover, neither does the economy, at least in regard to jobs and real growth. The best we can hope for is some stabilization at a lower level (which actually may be the goal of the administration).

Absolutely it's been a time of shifting and using new strategies finding the niches that work. We're all working harder then ever for less money and overhead needs to be watched very carefully. I do have a postive outlook on life and continued success - and I also know very well that shifting and staying ahead of the game is critical in these times. Critical.

Lenn - Great job of expressing where we stand and how we must prepare for a very different future. I recall reading a blog post a couple of months ago form Robert Reich, former Secretary of Labor in which he stated that we'll never recover from this recession; and he explained by saying, "All we know is the current economy can't "recover" because it can't go back to where it was before the crash. So instead of asking when the recovery will start, we should be asking when and how the new economy will begin.

I think you've accurately painted the picture; and it remains to be seen when the majority will be able to accept this "truth."

Lenn - Many of the "Business Plans" we followed in the late 80's and early 90's will be the same plan we will need to follow now to THRIVE as we enter a new dawn of Real Estate. Which is not much different than when I started in the mid 90's in my area. I for one have opened up some dusty boxes , pulled out the old Joe Stumph tapes. I am redirecting my focus and allocating my time in a more productive manner.

There will no longer be any instant gratification settlements as we saw in the last 7 - 10 years and the road to recovery will definately be a long one. They always are.

Interesting Lenn,

You actually LIKE Elizabeth Warren? I have a great deal of respect for her too. You do know that her views and solutions are way left of your political compass? She does have some significant outside-the-box thinking that is neither conservative nor liberal. For example her proposed use of school vouchers to "cure" the run up in housing costs for certain areas. But beyond that, from what I have read, she feels that the deregulatory climate of the past 30 years has contributed massively to a disproportionate shift of wealth into the hands of a the few. She also appears to believe that re-regulating the system is absolutely essential for the middle class to regain firm footing again. My guess is that higher taxation on the wealthy would also be high on her agenda.

Ruthmarie. I actually LIKE Elizabeth Warren. My political compass?? You'd be quite surprised. I know you don't know it because I haven't stated it.

Laura G. Our experiences from the 80s and 90s is surely going to help. That with the flexibility of Internet advertising . . . .

John. Mmmm. I've never been in like company with Dr. Reich, the philosophical big government fellow he appears to be. That said, he is often more balanced than many.

Anna. Indeed. Staying ahead of the game is critical.

Mike. I don't for one minutes buy this rosy 4% growth prediction. All of the administrations financial models for budgeting rely on a 4% growth. Which means it's all a house of cards.

Lenn,

After the last few years, I find it strange that so few voices echo the cancerous growth of negative equity. The reports contain lots of information. The key factor is that no one is addressing this negative equity problem. It continues to lurk in the background and eat away at any proposed fix.

I think those that proclaim we are at bottom have no clue about where we are. I think that those that think recovery will occur in 2010 or 2011 have no clue that recovery has not begun. Until the negative equity problem is addressed and a plausible solution is presented......recovery can not begin.

The old 80/20 rule may apply but the power of that nasty 20 overwhelms any progress made by the 80. It is sort of like having 10 illnesses. 8 of them are common colds, 1 of them is brain cancer and one of them is a snake bite from the infamous "two step" viper. The affect of the two will far outweigh the implications of the 8.

The economy limps along on money printed as fast as the treasury can run the presses. Just because the administration hands out thousands of dollars, it does not mean much if they are worth less and less. The homeowners held captive by the decline in value and facing a mountain of negative equity has seen NO RELIEF.

We are in for a much longer trial than any are reporting.

Economic predictions at this point are little better than what one might find in the daily horoscope. When the economy was rocking along okay we heard how horrible things were... now that the economy is in the dumps we hear that the future is bright.

I didn't believe them then and I don't believe them now.

In talking to brokers who handle REO's exclusively, they tell me that we are only now seeing the tip of the iceberg... many, many more foreclosure loom on the horizon. Until they are consumed I don't see how we can begin to see any substantial growth. It is true that we have seen an increase in the number of sales in our market HOWEVER prices are significantly lower due to the fact that a majority of the sales are REO and Short Sales.

And even if there is a turn around in the economy (and I hope there is)......4%??? Please! Get real!

John M. Thanks. I agree completely. Sometimes an "institutional memory" serves us well.

Lenn as always your "hard core" article didn't disappoint. Read every word with interest. Too many times I have had to castrate a Sellers Dream of the value of their home, and forego other listings because it was really in the clients best interests to short sale it or just let the bank take it. Tough choices. I just give them the facts, the numbers, and let them decide. As to the shrinking middle class, that will be one thing to keep an eye on.

The world is changing. We'd better be paying attention. Watch what's happening in europe and realize that just a few short years ago their world started changing, too. Especially look at the cost of housing in Great Britain...and its impact on their "middle class". Now those hard working people depend completely on the government to take care of them. Is that what we want in this country?

God help us if that's what we get.

Lenn...you call it like it is and that's a good thing in my book! Now...what's the story behind that image?

We can't predict the future all we can do is act in the now...interesting time to be a Realtor....Great Blog!

Erika. Thanks. The image is just someone with their head in the sand.

Monica. Sadly, the government appears to have that goal.

Kathy. It is very difficult to look at the SOLDs and tell a home owner what the likely sale price of their home will be.

Tim and Susan. Good insight. If only the "powers" could see what we see. Or, if only they would tell the truth.

Tim. Thanks. Interesting time??? Interesting thought.

Our last housing bust in Connecticut lasted 7 years. House values dropped by 33% and condos were closer to 50%, by the time the dust settled. The interesting thing is that people didn't walk away from their negative equity homes as quickly as they are doing today. They were literally more invested in their properties, because they had made substantial downpayments at the time of purchase. Our 100% financing was a wonderful stimulus, but had the negative consequence of enabling people to just walk away when the equity vanished. We are in this recession for a while. The fact that the savings rate is up may help us in the future. Great post.

Lenn, Are you getting your 80% numbers from any real source or it just your gut and personal observations? It would be nice to know for certain what those numbers really are.

What's that you say? "Powers" TELL THE TRUTH? ....I'm sure that you, like we, are not holding your breath! LOL

The "skeptic" in me thinks that the "powers" tell only what they think will keep them in POWER. The TRUTH? They can't handle the TRUTH!

There was a time not so long ago where faulty or misleading news would be labeled as such. The terms 'Spin' and 'propaganda' would be sufficient enough to cover the multitude. Today, I would even question the use of those words and simple call it what it is...misleading 'lies!"

LENN- Fabulous- A good work ethic and current market information are essential to survival. Listing agents will starve themselves if they are not taking listings which can see and appraise. Some areas more drastically affected by declining rates than others, and market value will be affected by REO's setting new price standards. You have got to know your numbers- I agree with you 100%

"How Are Economic Statistics Being Reported?"

Great question. Let's see...

Housing was de-indexed from core inflation decades ago.

Same story with substitution. Heck, if the price of steak goes up, people will just buy sirloin, right? Same thing...

And we all know that unemployment is really just 9.7% because the guy working at McDonalds has a job, it's just not the same corporate accounting job he had last year....

The "numbers" make no sense because the methodology has been manipulated for a long time. If they can hide inflation on the way up, they can hide deflation on the way down.

So do I see a 4% rise in GDP? Perhaps if they'll admit it's already dropped by double digits and the bulk of any real GDP growth over the next few years will come from government spending, which we'll have to pay back (with interest) someday. Otherwise, i'm not sold.

Good points about where the industry is heading. There will still be business out there, but we'll have to work both harder and smarter to survive.

John J. You wrote: The "numbers" make no sense because the methodology has been manipulated for a long time.

Sad but true. The numbers merely support the government's rhetoric.

Allison. Thanks. Those of us who can read the numbers and come to our own conclusions will be best prepared.

Jim. Sad but true.

Tim and Susan. Agreed. The tell us what will perpetuate their power structure. Truth is now fungible.

Tim M. If I got the number from a source, I would have cited the source. This is my observation and opinion. Differing opinions are always welcomed.

Millie. I was around in the crash of the end of the 1980s and early 1990s too. I recall that there were many folks who could dispose of their existing properties because their loans were assumable VA and FHA financed. Not so any longer.

That crash caused a 7-25% decline in market value and it took about 6 years before prices began to rise. However, many with equity preserved their equity. This was before the classic refi booms.

Lenn, I LOVE this post. It is so important that we truly understand the big picture economic outlook as well as our hyper-local real estate markets. And, the sources of our information have to be scrutinzed. This truly is such an important topic and post!

Lenn-

Your 80/20 figures seem right. This is going to be a tough time for agents whether they are new or experienced. This is not a market for the get rich quick folks who drifted into RE during the last 8 years. Consumers are not going to buy into the idea that all is rosy just because some figurehead in D.C. says it is so. They are going to be very cautious about what they are willing to spend.

Kaye. Indeed. You know you inspired this post.

the 80/20 number is a reflection of what I see as that percentage of consumers being "out of the market" due to negative equity. I suspect that it's really higher than 20%.

Lenn,

This administration, in spite of its "help" and the media are doing their darnest to talk us out of this mess. The problem is that the media actually talked us into this last year in order to get Obama and the Dems elected. That was easy because bad news is believed without critical scrutiny. We don't have to experience it to believe it. A few myopic reports of isolated events and "everyone" is having a hard time.

Now, they're trying to play the game in reverse, but find themselves victims of their own malicious intent and stupidity. People, by nature, don't believe good economic news unless they themselves experience it. And not many are. Therefore, all the positive predictions are having no effect. And as is evidenced in your post and several replies, we hope the predictions come true, but we'll "wait and see". i.e. It aint true until we personally experience it. And to compound the problem even further, all the "I'm with the government and I'm here to help" "fixes" have only made things worse. HVCC is just one of the items that's killing our biz.

Pict The Dem's and many political opportunists of the Republican stripe can't help themselves. I expect their ill-conceived attempts to takeover private matters and grab for total control of the population's activities. Right now, they want to control who/how anyone can buy a home, who/how anyone can go to school (they're taking over college finance right now), what is taught in the schools, under what conditions you can work, (hours, minimum wage, forced W2 employment), how much you can make (minimum wage, corporate compensation caps), what kind of health-care you can get and at what cost, where you can live, (enviromental prohibitions against building), what you can drive, what you can read/hear in the public media ("fairness" doctrine to control editorial content), what you can think (hate laws/political correctness laws), what you can do. They mandate acceptance of every sexual "expression", but outlaw any public display of religious expression.

I bring all this up because they believe they know best when it comes to how to live, run the country. And the track record over the past 50 years proves the exact opposite. Under this guise and opportunity of our current media induced "crisis", they keep legislating more controls in every aspect of our lives and its not helping. Look at what they've done to our industry with the banks puckered up so tight that they don't dare take a s*** unless they have written permission from the governement, in triplicate. And even then they want to wait to see if the rules don't change next week. Point is, you can't get out of a hole by digging deeper.

What gets me (and it shouldn't) is when will the media in this country take their reporting seriously, practice true journalism and report only facts, not promote political agenda's that are destroying this economy and our country? If they did that, then their reports of an improving economy might be received with a bit more credability.

(by way of full disclosure, I am not affiliated with either major political party. Parts is parts, now days, they're interchangeable)

Mike M. The media is beyond comprehension. They elected Obama and now they appear to be determined to promote his agenda. I suppose they need to vindicate their past performance.

Sadly, the opposition helped them along. Poor McCain didn't have a clue but 4 years of caretaker government would have been preferable to the dismantling of our institutions that we are seeing.

Hi Lenn,

I didn't mean to try to pin you down...actually from your writing - you seem to march to the beat of your own drummer. Which is actually a good thing. There is nothing cookie -cutter in your responses. However, I've noticed a strong anti-regulatory thread throughout most of your writing. In that sense, you appear to be rather conservative. Elizabeth Warren appears to support a heavier hand in regulation generally. That's why I was somewhat surprised.

Someone sent me a clip of Elizabeth Warren on the "Daily Show." It's not recent, but I may try to find an excuse for putting it up on a blog because she managed to be informative in spite of the venue. (Don't get me wrong - I like the Daily Show - but it is hardly news.)

Ruthmarie. I suspect that you've missed my posts where I rant and rave about the Gramm Leach Bliley Act which reversed the protections of the Glass-Steagall Act permitting Wall Street to engage in the very acts that, I believe, caused the destruction of the U.S. economy.

I believe that well designed regulation is essential. I also believe that it has to be enforced.

Sadly, I believe that our Congress and Executive is now so corrupt, nothing means anything except the effects of what they do and are doing.

I'm not optimistic at all.

Great post very informative

Lenn:

The unfortunate truth is that the only way to erase all the negative equity is though the foreclosure and workout processes, and the major lenders are reluctant to write down these assets on their already strained balance sheets. Perhaps if they had to "mark to market" these assets, that would remove the incentive for this behavior.

Most government economic statistics are managed. Take the headline unemployment number, which does not include part time workers who want full time work (the underemployed) or those who have given up looking for work (the long term unemployed).

"Sadly, I believe that our Congress and Executive is now so corrupt, nothing means anything except the effects of what they do and are doing"

Doesn't that say it all and explains the house of cards they are building? This may be the best post and discussion I have ever read on AR! Thank you for taking so much of your valuable time to do this.

Lenn,

I believe the middle class will also disappear.

I believe the middle class will be working into their 70's and beyond if they remain healthy, just to have bread on their tables.

I believe we will have "nobility" and "peasants", reverting back to the Middle Ages of past history. Those who have wealth will have servants, maybe indentured, to work their fields, clean their homes, chaffeur their cars, raise their children. WHY? SIMPLY BECAUSE WE HAVE NO OTHER EMPLOYMENT OPPORTUNITIES WITH OUR BASIC INDUSTRIES BEING TRANSFERRED TO FOREIGN SOIL.

I believe in the ideals of our forefathers, but they are not here anymore to guide us. Our legislative leaders await a recovery, while stymying attempts to procure new industry and return those shipped overseas. It may be too late to RECOVER.

When unemployment reaches 5 million, now at 15 million, we will be back to usual in all businesses. With the governmental forecasts being optomistic and eager to gain some favor in the countryside, they are "wrong" at this time.

I pray that I am wrong!

Lenn,

Amen..Amen.. You are offering clearly good solid advice. I always wondered when the shift changed from "we know our business and run our business in a business like manner!" In 1990 when I entered the business this reasoning was taught in Real Estate 101!! Thanks for the post.

Dorie. Thanks. We are in business, aren't we? It's a good idea to keep that in mind.

Eddie. I hope you are wrong too, still. . . . . .

David M. Thank you. I appreciate that. The corruption of our governing class is insidious. I pay no attention to what they say. I watch what they do and I don't like what I'm seeing. Sadly, they are not doing anything to help the housing industry. They drop little favors here and there but they will not address the severe dislocation of the wealth of the home owners in this country.

Individual home owners have no clout.

Jesse. Right you are. Mark to Market was fought bitterly and they won. Shucks. The securities that underpin the banks' assets today would be worthless if they had to Mark to Market.

#56. Thanks for stopping by.

Lenn,

One thing that I have observed about people, no matter what "class" they are in, is that they do not take paradigm shifts well.

Which is why there is so much obfuscation about the direction the economy is taking...it allows people to remain comfortable and stay in their current paradigms.

Seller especially do not wish to face the hard truth about what their houses are actually worth. Some will accept our advice on the issue because they really want to sell, the rest will continue to hire the agent who gives them their price and lets their home sit and sit, and chase the market down.

I personally don't buy the hype, and I have been refusing to chase after business with several sellers in my area because I know that they will not listen to reason.

Just my 2 cents worth.

Lenn, In my view business is made up of inspiration and perspiration. I personally need both. Having been through a few cycles has seasoned us a bit. Whether it requires a paradigm shift or just adjusting it is being done by everyone who is finding success in real estate. I also agree part of the challenge is filtering the information that is in the pipeline and then applying it. Thanks for pulling this information together. I think it points to the issues successful Realtors are monitoring.

William. As I have said many times, "An overpriced listing will eat you alive."

#63. Thanks. I've been through a few market ups and downs too and this is the worse I've ever seen or could imagine.

Hit bottom? The most that can be said is that prices have stopped falling ... for now.

4% GDP? I'm always skeptical about Fed stats, ever since they started calculating the CPI by first eliminating gasoline, food, and housing costs. What's left?

As far as the real estate paradigm shift, I encounter too many agents who look askance at blogging and short sales, two parts of my business I've embraced. Short sales are 60% of our sales here in Orlando! How can anybody possibly ignore them? Over 50% of my leads come from right here on ActiveRain. Tell me again how blogging isn't effective?

Love your ostriche!

Judy. Blogging is, indeed, effective. That said, I only speak about blogging with AR folks. As for the rest, I'm happy that they are blissfully ignorant.

Hi Lenn. I'm torn on how to respond to your post. I agree with some of what you say (lack of equity, the diminishing purchasing power of a substantial portion of our society) however I disagree with the prognostication that 2010 will be dismal. Looking at the economic statistics that are coming out weekly I'm lead to believe that there is a tremendous amount of pent up demand for consumer products in our economy right now. When the financial meltdown occured last year people put the brakes on pretty much all spending except the bare essentials. Our savings rate has increased, which is good. However, products only last so long. People have put off purchasing non-durable as well as durable goods. Very soon consumers will have to replace many of these goods. We're already starting to see it happen. And when it does more jobs will be created. When more jobs are created more people will have more money to spend and the economy, along with the housing market, will really start to hum again. Only this time it will be based more on cash purchases rather than credit. As it should. And that will make the coming economy a stronger one. Thank you for the post and best of luck to you.

Jerry. HA! From your lips to . . . . .

We'll see. I'm of the opinion that the severe dislocation in the economy is going to encourage folks to delay purchases longer.

One thing for sure, there won't be much in the way of using HELOCs to finance the purchase of consumer goods.

As usual, great article, Lenn.

I am not sure I agree with the 80% of licensed agents being sustainable. We all know the principle that 80% of the business is done by 20% of the parties. in 2006 there were somethikng like 800,000 realtors selling around 600,000 properties in California. (One statistic showed 1 realtor for every 52 adults in the state). The projection is that the number has/will shrink by 30%. I really don't see the 512,000 (80% of those left) even close to making it. I can only hope they do.

Lenn,

Elizabeth Warren seems to know what she is talking about. Hopefully her prediction about the future of the middle class will assume the first choice. The one where it will be stronger down the road. The other choice would mean big trouble.

Most of the time, isnt it true we are "away" from the bottom before we know it anyways?

I enjoy Elizabeth Warren's theories with support of studies. The middle class will disappear, or we will just have a "new" middle class defined with a whole new definition.

Call me naive but I am an American and as an American I believe that the people of this country will in the end prevail. We have been through tough times in this country before and managed to come back successfully. I believe now as with the industrial revolution and the technology revolution there is a creative American mind out there coming up with the next big thing. That's what we do hear, we invent and then other countries build. We may be going through a paradigm shift but that doesn't necessarily have to be a bad thing.

Hi Lenn -- I had to turn down 3 sellers this past month because of negative equity and they don't want to short sale. I'm sure it's happening everywhere. They mortgaged themselves to the hilt a few years ago when credit was cheap and easy.

Are you sure that the 80/20 rule means that we need 80% of the current agents? I'd flip that... we only need to best 20%.

And while I see a bottom in the market, unmistakably, I also feel that I am about to see another plunge beginning in about 60 days... And extending or expanding the FTHB Tax Credit won't change that. It will only change when the market is ready to change... when people aren't freaked out about their jobs and when they feel that it is safe to buy again. I am begining to think that will be in four years...

Very solid content. The only point I want to challenge everyone on is that an "uplifted state of mind" makes a huge difference. Being positive is part of that. When someone understands that state of mind it does attract your desires to you. No matter what the economy is a person in an "uplifted state of mind" will prosper.

Lenn, I love this post and the 75 comments it has generated. There is so much spin on any statistics depending on the point of view of the stat giver, that it is more helpful to look at raw data. A mortgage broker friend of mine always looked at durable goods to determine where the economy was heading. I agree with Chuck that a positive state of mind is very important.

Speaking of stats, let's look at the number of real estate agents. How inaccurate a stat is that? How many are there in every state that hold onto their license because they don't want to lose it but do $0 dollars business. How about the ones who do an occasional referral? How about the ones who do one to four deals a year? So on the surface, it looks like we have a lot of agents, but do you even think 20% are really doing much business?

SEP

The straw that broke the camel's back was the housing bubble bursting.

The reason there was a housing bubble was governmental policy seeking to put marginal buyers into homes (fostered by both parties in the Congress, two Presidents, the FED... and the NAR) - combined with lender dishonesty from the bottom to the top of AIG.

But the problem was not just the straw.

The problem was the load the camel was already carrying: too much public debt (at all levels of government, but especially at the federal level), too much private debt, a negative (until recently) private savings rate, too little willingness on the part of American workers to work in industrial jobs at world-wide wage scales, too little progress on making our schools a place where young people REALLY prepare for this century (instead of the last) AND too little appreciation for our precarious energy supply - coming as it does, in major part, from nations in a basically unfriendly part of the planet.

(The private debt part of this was exemplified by the use of homes as ATM's.)

Until we fix all these things, the middle class (and a "normal" real estate market) are in great jeopardy.

Not to mention the future of the Republic.

The current administration appears to have no clue. But they are not alone.

Lenn: Two of the most powerful points that you make are: Planning and running your business, so many real estate agents don't have any sort of plan. Second is to be on top of the market and watch for those changes, we have started telling sellers that their price can and just might change while the house is on the market.

And of course, what will those powers that be do?

Sandy. Being on top of the market is my hobby. I do plan but I also work very hard. Work comes first during work hours.

Jim. You're right about the effects of home owners spending their equity.

Frank and Sharon. HA! The cost of NAR national/state and local is far too high for folks who don't sell. They can keep their license but that NAR membership is steep.

Lane. I don't have a crystal ball but I don't believe we'll be out of this thing for many years. We have to almost start from scratch. Our consumer pool is far smaller than it was 5 years ago.

Chuck. Frame of mind doesn't sell real estate but it doesn't hurt either.

Chris. Folks who spend their equity have nothing to complain about.

France and Mark. Of course. I merely write what I write to keep folks aware to not expect things to stay the way they were. Those days are gone.

Lorrena. I surely don't want a society with very rich and very poor. That's a recipe for stagnation.

Esko. Dr. Warren knows here business. She's dealing with facts and trends and can analyze them very well. She's published warnings about the economy right along.

Jane. It isn't necessary for everyone licensed to be running a successful business. It's only necessary that those of us that are serious business people not be choked off by government action.

Woo hoo . . . a two'fer Thursday. A great read . . . AND I reported a "concern" over Jimmy Choo Bags, the idiot!

I'm amazed that the news media is saying "Oh, the recission, it's over now." (Let's all break out the bubbling and chant "Happy Days are Here Again!")

What do they think the economy is? A water faucet with on / off switches??

Lenn-- A large percentage of the population in my area already lives paycheck to paycheck. They are one illness or laid off spouse away from disaster.

Carla. Yes, our spammers are back. I'm just going to ignore them.

The media is delivering the administration's message. I don't buy it.

Erica. That's the way it is across the country.

That four percent number we keep hearing about is highly suspect. Without knowing what exactly went into it, and over what time period, it has little meaning. But that is not to say that it is not as good a guess as any other prediction. Fortunately, the only predictions that anyone remembers are the ones that come true, and they are remembered mostly because the predictor keeps reminding usof his/her accuracy. The bad predictions are quickly buried and hopefully forgotton.

Akron, Ohio

The problem with statistics is that they are created by economists or politicians or someone else with an agenda. As an economist myself, I can state with certainty that a good -- or even average -- economist can come up with statistics to support whichever position is desired. Most economists have two hands, so they can say "on the one hand, . . , but on the other hand." (A little humor there) That four percent number we keep hearing about is highly suspect. Without knowing what exactly went into it, and over what time period, it has little meaning. But that is not to say that it is not as good a guess as any other prediction. Fortunately, the only predictions that anyone remembers are the ones that come true, and they are remembered mostly because the predictor keeps reminding usof his/her accuracy. The bad predictions are quickly buried and hopefully forgotton. Akron, Ohio

(Sorry if this is a repeated post. I couldn't tell if it went thru OK.)

Lenn - I agree with you - I think that a positive attitude helps, but it has to be combined with hard work and a PLAN!! And let's add to that integrity and ethics - although realistically, there will always be those who choose to be shady. I think this industry needs a good cleansing...

I also think that wherever the bottom is, we will be there for a long time and the climb back up will be slow and gradual.

Always like reading what you have to say!

SEP

There is something else interesting here...

This recession is tagged as having started in December, 2007, yet the econcomy continued to grow in GDP until the 2nd Quarter of 2008... and the decline began in Q4.

Now they are claiming it is over, yet we haven't had growth in the GDP since 2008 Q2.

source...

SEP

Lane. There is recessiion and there is housing recession.

I deal with housing, not the economy which I leave to our "leaders". So, what the leaders are saying is: "The recession began in 2007." Now they are saying: "The recession has ended".

So, I look to the guidelines wherein: Technically, 2 quarters of economic negative growth is deemed to be "recession". We did reach that sometime in 2008. When the government "stated" that the recession began in 2007, it was a "statement" with no supporting data.

Now they are "stating" that the recession is over. All I want to know is, where is the supporting data?

If the government is no longer relying on technical data, let us know that they now rely on opinion. Or, perhaps they prefer to rely on that age old "feeling" definition.

Emily. Always glad to have you drop by and comment. I agree that this "bottom" will be here for a long time.

The sad part is that the media is running with it. There used to be a time when the media acted as a check on the power of government... now they are accomplices.

SEP

Lane. So true and so sad. The have no sense of responsible journalism. Merely headlines and opinion.

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