Do Not Discount Consumer Confidence - Speak Positive About Real Estate Market in Your Town

In business, we often say that the customer is King and indeed, the consumer is the supreme authority, not only on which products and services they purchase but also on the economy itself. If consumers believe the economy is going well then they will continue to spend, but if they feel poor or they think the economy is tanking or that we are going into a recession, they will stop spending.

Consumer economics is fascinating, especially the "consumer confidence" which appears to be 1/3 of the performance of our GDP. At the Online Think Tank, we follow it all very closely, especially right now - sinking dollar, subprime fallout, retail Q4 results, toy imports, auto sales, small business VS. box stores, etc.

In the real estate sector, it is particularly important to have a strong consumer confidence level in the economy and the housing markets.  The housing real estate market will rebound much faster if people have confidence in the real estate valuations and believe they will go back up.  If homebuyers do not believe that the real estate prices will go back up then they will create a self-fulfilling prophecy and that is exactly what will happen.

This is why it is very important for government officials, economists and the Fed to put a good spin on the future prospects of the economy and the housing market.  If the stock market, real estate industry and consumers believe that this market downturn is only a short-term problem, then the problem will be over shortly.  Some folks have criticized the Bush Administration's plan to shore up the freefall of foreclosures and lack of confidence in the housing markets.

Anything that the Bush administration or government can do to return the confidence is all good and even a mere public relations strategy is worthy of note.  Having lenders and consumers talk to each other and giving everyone a brief timeout to prevent a landslide of foreclosures in the first half of the year of 2008 is a good thing.  Currently, we all know that there is a lot of supply of homes for sale on the market and the prices are depressed and soft. Saying we are in a buyer's market is somewhat of an understatement right now.

Many buyers who are interested in buying a home are holding off or they are making completely lowball bids and each home seller, who takes such an offer helps drive the prices in the neighborhood down even further.  This creates more homeowners who are upside down in equity that are willing to walk from their properties and leave the bank with the problems, thus putting  more homes on the market - times about 3 million, which is predicted to happen in 2008.

The best thing Real Estate Professionals, Federal Reserve, Bush Administration, Wall Street Analysts and Economists can do, is to explain rationally what is going on and help return the confidence to the market by staying positive - that's true leadership.  The real estate market goes through cycles and this is no surprise as every industry sector goes through rotations.  At the top of the bubble there were obviously lots of deals going on based on irrational exuberance and when that balloon popped, the bottom dropped.

If you are a real estate professional, I advise you to dump the negativity and start talking up your neighborhoods and communities.  Talk about why you live in such a great area and why there is still demand for homes in your city.  This is the best thing you can do to help the market return.  It is time that all real estate professionals become part of the solution and not part of the problem.  This is definitely something to contemplate in 2008. 

I would please like to have your "Personal Commitment" in writing below, by way of a comment stating that you will pull your weight in your market to help the residential real estate market return. This is serious and if you are not going to help solve the problem, then maybe you should find another profession? What say you?