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Is Now the Time to Buy?

By Christian Russell

Education & Training with R World Properties, Inc

January 07, 2009 03:57 AM

This is a follow up to my last post...

Will buying now make you a millionaire? Have we seen "the bottom"? I don't pretend to know exactly what will happen in the next 5 years. There was a rally on the dollar and downward pressure on gold as recently as Obama's last talk on his new "stimulus" deal. So yes, there will surely continue to be ups and downs, as is always the case. But the general trend is toward the downside. And I don't think that trend is doing anything but picking up steam right now. I'll stick my neck out a bit and say I'll be surprised if real estate values go back to where they were anytime in our lifetime. To boot, we have another 40-50% or more to go on the downside in some markets. It may sound hypocritical, but this is NOT a doomsday outlook! It's a time of change, a GOOD change.

Owning a personal home has never made anyone a millionaire. Sorry, not for real. Maybe on paper, but look at where all our "millionaire" homeowners are now. They're listing with us for considerable losses. That's not wealth. A personal residence has never truly been a store of wealth. We're looking at it incorrectly. Look, what I'm encouraging everyone to do is to build a business that will last. Surely we're all on the same side here.

This is not the time for us to be looking for a correction. Real estate values in some parts of the world have been flat for hundreds of years. It doesn't matter. My point is to build a business built on serving clients...and in order to do that we need to have a realistic outlook on what real estate is and what it's not.

I'm an adamant supporter of homeownership. I'm a Realtor. I own property, and I enjoy it. My home is where I live, it's not an investment. I pitch homeownership to clients for what it really offers...tax advantages, pride of ownership, a fixed payment while rents will likely continue to rise and more. You know the drill. Appreciation is grotesquely overrated, and an inordinant focus on it serves to distort our perception of what real estate really is and the function it serves.

Real wages are going down (for many of us, all the way to zero), inflated dollars totalling over 50% of our entire GDP have flooded our economy in recent months, and we think the real estate market is going to "come back"? If someone can show me how, I'd love to learn! Here's what I submit:

1. Home prices will continue to decline, another 40-50% or so in some areas.

2. Inflation will negatively affect home values in a big way. While prices may be steady or rising in some areas, values are actually going down. If your home is worth $250k and the dollar loses value, your home loses value, even if it appraises at a number that impresses you.

3. Real estate professionals need to build businesses based on service to thier clients, as opposed to "doing deals". Realtors are NOT losing their foothold. They are just as needed as ever, but in very different ways. Those of us who survive are going to be the ones who adapt to this.We will be able to continue coasting on fumes for quite a while perhaps, but again, the trend is toward the downside. We need to reinvent ourselves.

It may be a semantical disagreement I have with my colleagues more than anything else. When I say that the market's not coming back, I don't mean the world's going to end, or that real estate is no longer a viable business or that we won't be able to make a living doing this. What I'm saying is that what was happening in recent years, with the double digit appreciation, easy money and people being able to use their homes as an ATM machine...that's over. And it's not coming back. We'll be best served, as will be our clients, by focusing on our education, getting very good at what we do, stop focusing on production and start focusing on consultation.

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Diane Daley

Caron's Gateway Real Estate - Northumberland, NH

Sounds so doom and gloom.... Rates are favorable and sellers are will to negotiate... It's time to buy...

Jan 07, 2009 04:02 AM

Christian Russell

R World Properties, Inc - West Lafayette, IN

I agree. It's a great time to buy. You misunderstand. The real estate market is active and there is a lot to do. My goal is to challenge real estate professionals to rethink the way they look at their role in the market. I talk to so many people who are looking for things to "go back to normal". There's a lot more at work here than just home sales. The Fed is destroying our currency, just one big example. We can't just ignore that, be happy rates are low and go back to selling. I want people to look at the bigger picture. There is opportunity everywhere, and things as far as I am concerned look very bright, but when the landscape changes, you gotta go with it; if you keep doing the same stuff and working off the same ideas, you're not going to go very far.

Jan 07, 2009 04:11 AM

Michael Wayne Jackson

Coldwell Banker - Novato, CA

Broker - Seniors Real Estate Specialist Novato

Whomever is buying right now will reap the benefits in the years to come, it a great time to buy right now.

Sheldon Neal

Bergen County, NJ - RE/MAX Real Estate Limited - Maywood, NJ

That British Agent Bergen County NJ

Wow ! 40-50% declines to come !!! Yikes ! ...I hope not, although if it is somewhat of a buyers market now, then it sure would be then !!!

Double digit appreciation? maybe not, but I think time is a real good healer, and 5-10 yrs down the road I think theres a shot of the 7-8% increases to return.

Interesting food for thought though, thanks for the post !

Jan 07, 2009 05:15 AM

Erik Hitzelberger

RE/MAX Alliance - Louisville REALTOR-Luxury Homes - Louisville, KY

Louisville - Middletown Real Estate

Christian - I tend to agree with your assessment that the market we have seen over the past few years will not return. Homes will appreciate again and will reach the same prices as they were, but the appreciation vs. inflation and home value to income ratios won't return. I'd go further and say that this is a good thing since it was obviously unsustainable.

Jan 07, 2009 05:32 AM

Sheldon thank you for the comments. If anyone can please tell me WHY they think continuing price declines are unlikely, I'm the last to say I have all the answers. Please be specific, and maybe we can all learn something here.

From what I've learned, price stablization will need to come from somewhere; it's not going to happen just because we can't imagine it being otherwise. Where will the money come from? We're broke. Anyone in US dollars anyway...is broke and getting broker (no pun intended!) by the day. So if sales are going to pick up and if prices are going to even out, it will require money being spent. Who has the money that going to be fueling this activity? Yes, Uncle Sam is PRINTING dollars to "stimulate" the economy, but that's not money; it's mere currency, and every dollar they print is worth less and less.

It's true that some buyers and investors have been on the sidelines and are now in the mix, writing offers. That keeps us busy and may perhaps give us the illusion that things are "coming back", but don't ignore the facts...they are making firesale purchases to buy property with inflated dollars, and the end to inflation is nowhere insight. In fact, Obama is going to start dumping even more inflated dollars in our economy very soon.

That's why I write "gloom and doom" posts like this; not to be a jerk but to get us talking about the bigger picture. There are REASONS the market's down right now, and those reasons are picking up momentum, not slowing down.

Jan 07, 2009 05:35 AM

Erik, yes...but that's not KILLING your business is it? Everyone's in a downturn right now, but there's still a lot to do. Realtors have myriad ways they can help their clients these days. We have a lot of tools at our disposal to create value for consumers. But if we leave our way of thinking unchecked and don't get educated about how real estate works these days, we'll end up doing more harm than good. How can we educate the consumer about what to expect if our brains are still stuck in 2004?

Jan 07, 2009 05:39 AM

Rebecca Levinson, Real Estate Marketing and Online Advertising Consultant

Real Skillz-Clear Marketing for Your Real Estate Vision - Lake Geneva, WI

Christian,

Ahhhh:-) I agree with you.

I sure hope we never see a market like we did in the boom, it sets up a false expectation, a surreal way of life. It's like when a person is addicted to a drug and they ride a momentary high. It feels good to them in the moment, but when the moment is gone, what then? They are left worse off than before they had take the drug.

This is the best time for real estate agents to show a true value. As competition leaves, real estate. agents can build a business for life.

I'll say it again as I have before. Selling a house? No you are selling a lifestyle. A home.

Jan 07, 2009 11:12 AM

Anonymous

Christian

Great to hear from you Rebecca! Yes, the drug analogy is perfect. The "high" is the boom. It feels great, but it's actually the thing that makes you unhealthy. The recession is detoxing...it's really rough, but it's how you get healthy again. The recession is a good thing. We are ill-served to build a business in today's economy that's focused on anticipation of a recovery. This is the opportunity for us to build a business that can last. We need to see the opportunity that exists TODAY.

Jan 07, 2009 01:57 PM

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