The Perfect Storm

Real Estate Agent with

The Perfect Storm

RE/MAX's Dave Liniger talks about real estate's "perfect storm"
Dave Liniger, is the co-founder and chairman of real estate brokerage giant RE/MAX, with RE/MAX CEO Margaret Kelly. 

On this real estate downturn compared with past ones
"This one is probably more widely spread throughout the entire country, but I don't think it's nearly as bad as the market we had in 1985-1986." By "we," he meant people in Denver, where he and his wife Gail founded RE/MAX in 1973, and other markets where the regional economy depended on the energy industry. In the mid-1980s, falling oil and natural gas prices combined with still-high interest rates to devastate the real estate business in those areas even while the rest of the country kept motoring along.

On the causes of the bust
"The loosening of the money supply and the unreal low interest rates that Greenspan allowed to happen created an unsustainable boom."

On when it will end
"This correction is going to last at least through 2008 and probably into 2009." The National Association of Realtors says that when there are 6 months of housing inventory, you have something close to a market in equilibrium. "For the U.S. as a whole, inventory is now at 10 months. In markets like San Diego and Las Vegas it's 14 to 16 months."

On why it will last so long
1) "Credit standards have tightened significantly, and you're not going to have a subprime market" for a while.
2) "The builders overbuilt. They swore they would never do this again." Builders had tried to avoid past excesses by not constructing houses until they had buyers. But now lots of investor/buyers are walking away from their down payments. "Builders ended up with a tremendous amount of inventory they thought was sold."
3) Lots of foreclosed properties are coming on the market and will continue to do so.
"These three factors are creating a perfect storm, meaning this market is the one we're going to have for the foreseeable future." Still, there will probably be 5 million resales this year and 1 million new homes sold, and about the same amount next year. "That's as good as 1999-2000. It's just not the boom we had."

On why he is more pessimistic than the people at the National Association of Realtors
"The NAR is a fabulous trade association whose job is to protect the industry and its constituent members. I've always found most trade organizations to be overly optimistic in assuming that if they put a positive spin on things there will be a positive outcome. ... The NAR keeps saying we're bottoming out, and every month for seven months they've had to change their forecast."

On slowing growth rates in Florida
Baby boomers from the Northeast aren't moving there in droves like their parents did when they retired. Many "have been buying places within 250-300 miles of their old homes." Also, "South Carolina, Georgia and Alabama have the climate, cheaper houses and lower tax rates. Migration into Florida has slowed significantly."

On the longer-term future for real estate
"I think the future is quite predictable. There is no difference between this downturn and every other downturn I've experienced in 40 years in the business. When this inventory gets worked off, prices will go up again. Not like they did in the last five years, but up."

And finally, a quote from Margaret Kelly
"We haven't had a buyer's market like this in years."
2010 is expected to be the highest amount of short sales and foreclosures to hit the market.
This is the best time to buy in years!

Cindy Steinemann

Specializing in selling homes in

Stonecrest, Fl and The Villages, Fl

352-266-5836 cell

352-577-1002 office

"Bug Me With All Your Real Estate NEEDS"

Comments (2)

Eddie Matthew
Zenith Realty - Perry Hall, MD


Good post.  Regarding inventory, just like unemployment records do not give the total picture of the jobless, the housing inventory may not be showing the additional sellers who have temporarily given up trying to sell their houses.  So the inventory could take even longer to decrease.

Dec 04, 2009 06:12 AM
Charles Stallions Real Estate Services
Charles Stallions Real Estate Services Inc - Gulf Breeze, FL
Buyers Agent 800-309-3414 Pace and Gulf Breeze,Fl.

Such a storm no doubt, but we will weather this one as well. I stay ready for just about anything.

Jan 05, 2010 02:33 PM