There term "Real Estate Recovery" is an oxymoron because it isn't occurring! It is interesting to look at what is taking place in our industry these days, and it is even more interesting to see what isn't. Historic low mortgage rates are not bringing buyers out in droves as they normally would. Massive builder incentives and bonuses are not whetting the appetite of cashed starved agents and brokers to sop up excess inventory some of which has been sitting for years. Buyers sense there is something else is about to occur. There is a pervading sense of dread that the other shoe is about to fall. Pending contracts, building starts are down...the message is loud and clear..."Slow times ahead!" In the Atlanta area, new contracts are the lowest level in over 10 years!
Rising unemployment and lack of any real job creation after massive amounts of Federal Funds have been spent... have set an uneasy mood across the nation. Consumers are finally watching their spending which in one way is good, but it also means less money is going back into the economy. Even a blind person can read the writing on the wall. It is not working. We are in a deflationary cycle that no one is acknowledging. For the consumer, it translates into a major loss of confidence. Buyers are afraid of job loss, and that they may be the next persons laid off, or their wages could be cut. They are also concerned about the future devaluation of real estate property values, inflation, higher taxes, and in turn they are afraid to take a calculated long term risk. Can we blame them for being prudent and wanting to buy right? No we cannot! This is real money they are risking. Our industry acknowledges that recently closed sales are still comprised with more distressed homes sold than anything else. That does not bode well for future property values, and according to most industry experts there is no end in sight to this vicious circle.
Washington is sending the wrong signals...are they really fixing the economy or wrecking it? The banks that were awash with taxpayer dollars are not making loans as they should. In fact the complaint many loan officers and those actively engaged in real estate have noticed that loan processors in many banks were short staffed. Instead...many banks were taking the Federal funds and creating their own hedge funds with taxpayer dollars and are making billions a month in profit mainly buy betting against the market. The interesting thing is that Congress did not foresee this before they freely gave away a trillion dollars of stimulus monies with basically without any oversight. Nothing in the last year has been done to correct this. Big bonuses in government bailed out firms that were not tied to any real performance and political cronyism has sent the message to the public at large that it is business as usual in Washington DC. It is all about them, Congress's political futures and not the welfare of the nation's.
Meanwhile if we learned any lesson from history it is not to repeat mistakes of the passes, In the 1930's immigration was suspended because what is the point of letting more persons into the country while our own neighbors were out of work? Yet Congress defiantly does nothing to correct immigration issues, or crack down on those that hire those worked that are undocumented. We are a nation that cries out equality, yet openly has a slave labor class that in our current economy only compounds the problems. Never before in the history of this nation have we had 30 million illegal aliens, and compound that with less work to go around. History also teaches us that the government interference into the economy in the 1930's actually prolonged the Depression from 1929 to 1940. There are no incentives or innovation when the private sector is removed from the equation. Higher taxes in dire times will not spur on a recovery. It will turn the United States into a feudal state and lower further the standard of living which we have learned to love in the one "Land of Opportunity!"
With federal Tarp funds and bailout monies for the economy now expiring, I see trouble ahead both short and long term for our economy. Higher taxes, less government services, high unemployment, and a contraction in home values not unlike what Japan went through for many years to come. The reason I say this is that Washington has not taken any of this seriously. They have just taken advantage of the situation for their own gain. The solutions coming out of Washington are political solutions, not real fixes. I can fully understand buyers that are afraid to risk their own capital and jump into the market. Reluctance, apprehension! Are you seeing I what I'm seeing? Where Does Real Estate Go From Here?
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Jim, I don't disagree with what you are seeing now, but I do believe things will change in November 2010 as the House and maybe the Senate change back and slow this engine down. At least I am hopeing so.
Missy Caulk-Ann Arbor- Realtor(R)- Ann Arbor Real Estate (Keller Williams-Ann Arbor) I agree, the political change will start this election day. We need patriots and not self serving wolves looking out for our interests. As far as recovery..it is a long way off. The damages is excessive!
Wow, now's a great time to buy, jump off a cliff? Things are different in different parts of the country. Buyers ARE coming out in droves here in Northern Virginia for the low interest rates and although some sellers are down or tight in value, the mood is not dire. I don't see how you can get any houses sold with a blog like this. When a prospective buyer contacts you, do you tell them to put their money under the matress in their rented house and stay there? Do you really think just because the economy is tough, people will actually want to rent forever? Homeownership is the foundation of the American Dream, and unless we become a country of homeless people, folks are still going to buy houses.
Coral Gundlach (McEnearney Associates, Arlington Virginia) The Washington DC area has a recovery based on the taxpayers dollar...that is not how the rest of the nation is fairing. Since the Federal Government is removing itself from the picture it is likely to slow even in the DC area. Enjoy it while it lasts.
Jim - Nothing will change until we change Washington DC, put people back to work, and overhaul Wall Street. Hopefully, Missy's right....things will begin to turn in November. I have a feeling we're in this one for a long, long time!
I completely agree. The solutions that Washington offers are nothing more than opportunities for politicians to grab more power. Even Bernanke calls the situation "unusually uncertain."
Lina Robertson, REALTOR, Springfield MO Homes For Sale (RE/MAX Solutions) Lina, I agree, and I am starting to feel the same as you!
W. Darrell Walters - Integrity Mortgage Funding I thought Bernakes words last week were beyond scary and yet the manipulated stock market still climbs on speculation!
Jim, Thank you for a well written and well thought out post. Despite the inability of some to see outside their own little bubble, the NATION will not recover without the WHOLE becoming healthy.
The Atlanta market has been especially hard hit with foreclosures and job losses and I see what you do, buyers are back on the sidelines waiting for the other shoe to drop. The devastation is moving up the socio-economic ladder with rising foreclosures in the Million Dollar Mortgage Market, small business owners are going under left and right, and the commercial market's bubble is leaking like a sieve.
No since playing PollyAnna in these times.
Jenna Dixon, Associate Broker (DRA Homes (Atlanta, GA)) Jeanna, I totally agree. We all need to take the blinders off and see what is really occurring.
Bleak picture, Jim, but a little reality is always refreshing from a real estate pro. Keep up the good work.
Sam DeBord - Seattle Real Estate Broker (SeattleHome.com - Washington State Realty) Thanks Sam. No one ever wants to look at reality...but then again that is why this nation is in such a mess!
Jim,
Very well written post. I am definitely seeing this in Atlanta. Having said that, I am seeing an explosion of business in our Executive Leasing and Property Management business. Many folks who have phenominal credit and cash in hand are NOT buying but leasing. It keeps me busy!
I do hope we get a big change to fiscally responsible congress working for us. In fact, I think everyone in Congress ought to have a high credit score of over 750 and really get what it means to say you cannot spend what you DO NOT have!
The biggest positive I see in Atlanta is low inventories that if they continue to fall, will slightly improve our market.
All the best, Michelle
Michelle Francis, Atlanta GA (Tim Francis Realty) Atlanta has one major issue. A few years ago we led the nation with no money down loans. We are paying dearly for that now. What is troublesome is that new foreclosures in Atlanta residential real estate are outpacing sales 3 to 1! That may drive prices back down again if it does not abate.
Jim good to see you on the rain again. Nothing but a power grab and the new politicians better listen to the people this time for once. Cut the spending and taxes and reward the hard working.
Jim-
This country cannot move forward without a healthy Housing industry. Housing is about 18% of GDP. Without it what takes up the slack? here in Nashville we're down about 40% from traditional levels, and we are a bright spot compared to many.
Keep telling the truth. If it makes people uncomfortable thye will have to grin and bear it.
John Walters (Licensed in Slidell, Louisiana) (Slidell, Pearl River, Lacombe) I agree, real change is needed and soon.
Jim & Cathy Wood Greater Nashville Area Real Estate (Crye-Leike Realtors, Inc.) It is uncomfortable sharing the truth, but the reality is that many of my friends and brokers that were in the business as long or longer than I am are no longer selling real estate. Many have lost their own homes, and the agents have abandoned ship. There are not enough quality deals for all to go around.
In my opinion there are many solutions to the trouble time we live in, but they are not politically profitable. Why weren't the tax credits expanded to more than one price range? Why weren't investors with great financial standing allowed to buy many properties? Instead, the congress has allowed banks to play hedge fund managers with government funds and in turn not lending it out to the public as they should. Yet there is almost no public outcry for investigations!
You are abosutely correct. I was volunteering in a church Resale shop this morning. Much of their inventory is significantly over-priced and many shoppers were complaining. The management of this store could not understand why people are not buying things from the store. I did my best to explain to her that many stores have been forced to drop prices to get anyone to buy anything. I explained to her about deflation and depression and how when Walmart says they are "rolling back prices..." She had never taken economics and it was a real eye-opener for her. See, a good deal of her pricing was done a year ago. Prices on merchandise has dropped since then. It is the same in the Housing market. Prices are dropping on many things-but not oil. Infact the ban on drilling is making the entire situation much worse, and at such a bad time.
Good post. Don't worry about it discouraging potential clients. They will be glad to know you understand economics 101.
down of course... anyone saying otherwise is ... making snoring noises
I agree with Jim on this when he says,
As far as recovery..it is a long way off. The damages is excessive! Sad to say.
Patricia
Jim,
The politics of this new administration is sucking all the money out of the private sector. I believe November will be an eye opener that should help us all.
Perhaps we should start speaking Mandarin Chinese? I could also get on the band wagon about the unsolvable debt our nation faces. Nonetheless, not everyone is retracting from this market. I'm hoping the sloppy part-timers of this industry consider another profession so the full-timers have less pie to share. I think we all need to seriously cut overhead, dive into your faithful beliefs and do this business differently to sustain for the next few years. We can still make a living, but we might have to empty our resources like Joseph did during the famine.
Jobs, jobs and more jobs -- that's what needed and the elections in November!! A very good post Jim!
Jim, You've said a mouthful! I only wish Washington were listening, on the other hand maybe they are ~ with an attitude of "Let them eat cake".
Its about the jobs... and the jobs won't come back until people that run small businesses (the VAST majority of the job creators) feel like they aren't going to be facing massive new regulations and taxes... This isn't the time to break out the red tape and tax bills. This is the time to get out some grease and a little comfort food. No tax increases and enforce the borders...
Thanks Jim, for an outstanding post.
Yes we are salespeople, and yes we need to be optimistic, but that optimism must be tempered with Reality. The never-ending drivel from NAR and elsewhere that "times are good", "housing sales are up", and "the recession is over", make Realtors look like fools in the eyes of a Public that is unemployed, underwater, under 600 (credit score), or in foreclosure.
Trillions - not billions, but trillions of dollars in "TARP" and "Stimulus" and other Expenditures have done absolutely nothing to remedy the situation. (Interestingly, the $8000 Tax Credit stimulated the economy; you would think the Politicos would realize that Tax CUTS stimulate growth, not Tax Increases).
November is America's chance to Erase the Mistake. If the Incumbents, at local, state, and federal levels, are not thrown out of office, then may God help us.
Whatever is going to happen it best happen fast. I have seen many slow downs in my life but none like this. Ceil is a medical recruiter, what once was a vibrant industry has also come to a standstill. Hospitals aren't buying products and many companies have let the sales force go. That there tells you something. If you don't have a buyer you certainly won't be able to sell.
JOBS IS THE KEY TO THIS MESS. We are just digging in deeper and deeper with each passing day.
Hi Jim, I am sorry, but I just could NOT help myself... please forgive me!
A 250 word auto-summary from MS-Word, just for fun:
There term "Real Estate Recovery" is an oxymoron because it isn't occuring! Historic low mortgage rates are not bringing buyers out in droves as they normally would. Rising unemployment and lack of any real job creation after massive amounts of Federal Funds have been spent... have set an uneasy mood across the nation. It is not working. The banks that were awash with taxpayer dollars are not making loans as they should. In fact the complaint many loan officers and those actively engaged in real estate have noticed that loan processors in many banks were short staffed. It is all about them, Congress's political futures and not the welfare of the nation's.
Higher taxes in dire times will not spur on a recovery. With federal Tarp funds and bailout monies for the economy now expiring, I see trouble ahead both short and long term for our economy. Higher taxes, less government services, high unemployment, and a contraction in home values not unlike what Japan went throught for many years to come. The solutions coming out of Washington are political solutions, not real fixes. I can fully understand buyers that are afraid to risk their own capital and jump into the market. Reluctance, apprehension!
(MS-Word claims five mis-spellings in the original. Can anyone find them?)
Pardon my lack of restraint, really!
Yes, I did read the whole thing...
You have made many good points here. Time will tell, as they say..
Jay Leno (the talk show host, not an economist) said on TV last nite.. We paid about $200k per job created... A better stimulus would have been to write them each a check.... (BUT, perhaps Job Creation does have a more lasting effect?)
~~ George
Amy Law (Alliance Properties) We recently closed a few listings, and it was very sad to see what is really occurring in this market. Decent people that placed big earnest monies down are selling their home at major losses because Congress decided everyone should have the right to own a home even if they could not make the payments. That was politically self serving act and a slap in the face to every hard working American that abides by all the right rules.
Vince McEveety (Keller Williams Realty) Not only are the past numbers down, we need to pay attention to what the new numbers are forecasting....numbers always tell a story. We can choose to interpret them or ignore them. The latter is not advised.
PATRICIA AULSON, REALTOR Portsmouth NH Homes-Hampton NH Homes (PRUDENTIAL VERANI REALTY- Portsmouth NH Real Estate ) It is very sad to say.
Mike Frazier, Dyersburg Tn Real Estate (Carousel Realty of Dyer County) I would like to view this as a wake up call! I hope you are correct.
George, There is an email link whereby you can contact Jim and let him know... the nicer route.
Colorado Springs Realtor - Cherise Selley (Selley Group Real Estate, LLC) Amen! I have revamped my business model in the last 3 years, and actually have done very well in spite of tough times. I cut expenses and eliminated waste in the early onset of this market slide. I am all set to modify the business again if the markets do not pick up again shortly.
Carla Muss-Jacobs Principal Broker/Owner EBA Portland LLC | www.EBAPortland.com | (Exclusive Buyers Agent Beaverton Portland) I totally agree. We need real jobs...and real jobs are only created in the private sector.
Sara Homan (Coldwell Banker Ellison Realty Inc) Boy you nailed it! You are exactly right!
Lane Bailey - REALTOR & Car Guy (Diamond Dwellings Realty) It was reported last weekin in Atlanta that per capita GA is second only to California for the number of persons out of work. Metro Atlanta has over 250K unemployed and we are now at 10.3% a major jump!
Fred Griffin Real Estate, LLC This November may be a "DO OVER!"
Carl & Ceil Winters Complete Inspection Svc. (830-660-0131) It is so sad to say, but I agree with you! On a recent television interview in Atlanta for the evening news I was asked, Did you ever see it this bad?" My answer was "No, I'm only 55 years old!" We need real jobs!
George Fanucci (CoreFact.com) Thank you George!
Hey, Jim - Since things seem to start in California and then spread east, here's hoping that our real estate recovery here in San Diego spreads to the rest of the nation. And fast!
Sales have been increasing since January 2008 and prices have been going up since February 2009. Unemployment is down, consumer confidence is up, construction permits are up, foreclosures are down, notices of default are down, and probably some more great news that I'm forgetting right now.
Of course, since we were one of the first markets to collapse, it's only justified that we're one of the first markets, if not THE first, to recover.
Keep the spirit, though. Maintain that positive attitude and work hard to make sure your business doesn't succumb to the doom and gloom all around you. I got started as a real estate agent in May 2005, right at the absolute peak, and I've done pretty well with all the doom and gloom around me. Why? Because I don't let it affect me. I have a plan, I work that plan, and I produce more than I consume. It can be done, but not by sitting around complaining about things.
Our ills go way beyond politics and political parties !!! As a Republican , I can say that I have no more confidence of economic brilliance coming out of my party even if there is a change in Congress !
I've noticed many folks who would like to make a move but they are "waiting" for next year, or ''waiting" for the market to improve. Also I've seen some darn good offers on their properties on the table but the sellers are "waiting" for the next offer.
Thanks for telling it like it is Jim.
Howdy Jim...
It is not what you tell yourself, but what yourself tells you.......what you know to be true. People in the industry know what is going on. Then, there are those that try to manipulate the data for personal gain and reasons.....In the end, those that are in the flow and have savvy (who do not doubt themselves) cannot be persuaded to believe that black is white or even gray. I can see change when change presents itself and not when someone says........change is here. High unemployment is going to be with us in our neck of the woods for 2-3 years, lenders are stricter, new construction is on hold, foreclosures are flooding the market and prices are trying to stabilize, but are pulled down similar to a yo-yo going through its cycles......The economy......this time out....is a tough one. Thank you...for your post and allowing me to share...
Jim Frimmer, Realtor, Mission Valley, CA DRE #01458572 (Century 21 Award) Thank you for your comments and insights. Some areas of the nation are hit harder than others, and I am sure that even in California some areas are doing great. I have to deal what is on my plate here and in spite of a bad economy I've done very well because I know what's going on in my own market.
Michael J. Perry (KELLER WILLIAMS Realty Lancaster, PA.) I agree...there are a lot of structural issues that have to be corrected before we can proceed forward.
Linda Metallo (Re/max Impact, Lockport, Illinois) Maybe that is what we should refer to this market as "Next!" People are apprehensive, and cautious! However there is an old saying in real estate that is true even now..."The first offer is usually the best offer!"
Richie Naggar Ran Right Realty Riverside, Ca Richie, well said. All this is is a cycle...even if it is a lot worse than other ones. Business cycles are not all up and they are not all down. The center to the two extremes is a good place to be!
I find it very interesting that so many commenting on this thread think that by putting the politicians who caused this mess and who are now doing everything in their power to obstruct fixing the mess that they caused is the answer US economic prosperity. Methinks you might want to examine a little more closely how we got here before you cast that vote . . .
Carl S
CIDM Real Estate Well lack of oversight from Washington DC, lack of enforcement of laws on the books, campaign contributions to politicians on committees maybe just for starters. I can understand where they are coming from. You're telling me Congress did not know all of this was about to occur? Nonsense!
Our current economic situation has been a long, long time in the making--like 30 years in the making. Both political parties have made terrible decisions purely based on their own election and survival. Cutting taxes doesn't work unless you make cuts in government programs to offset less money coming in. And you can't expand government programs and government spending (like homeland security, social security, perscription drug benefits, military spending, etc.) unless you are taking in more tax revenue. Both parties have tried both of these methods to get elected and all it has done is increase our nation's indebtedness.
As hard as it would be, we need a national mindset change. Two or three generations of Americans need to change the way they think and how we move forward in the future.
Agreed Jim. Good post, but we seem to have many with their heads in the sand while accusing any non optimist as being guilty of treason.
Shari Posey (Prudential California Realty) Very well said, and I agree!
Joan Snodgrass Tri-Lakes Realtors, Shell Knob, MO (Tri- Lakes REALTORS) Most persons only read the headlines and not the story. I am an optimist, I am making money...because I know what is going on. I know many optimistic agents that are no longer in business. Their broker closed the doors, they succumbed to their own foreclosures and bad credit etc. They were not prepared to deal with the events because in reality...they were in denial.
I sure am not seeing that 'laser focus on jobs' that was promised... And it is pretty evident here... Few are making 30 year plans when they are unsure of next month's paycheck.
Lane Bailey - REALTOR & Car Guy (Diamond Dwellings Realty) Lane sad to say...but that is what I am seeing also.
Great post! I totally agree with you Jim the recovery still years away!
Thanks for sharing,
Adam
Adam Malachi QSC,CIPS,CNE,CRB,CRS,E-pro,GRI,MRE,SFR (Your Castle Real Estate, LLC) Thank you Adam. I think we are going to see some more contractions in the short term. State and local governments are the next ones that are facing immediate fiscal crisis. That translates into higher taxes which will place a cap on prices, sales and growth. It is simply economics 101. The government acknowledge last week the scenario is more likely to be what occurred in Japan. That was a long drawn out process.
Hi Jim,
Great job on your post. It was well thought out and well written. I have reached the same conclusions. We are in for a long slog to recovery after the housing market bottoms out. In my area unemployment, foreclosures, and a 2.3 year inventory are exerting downward pressures on home prices. Two-thirds of all home sales last year were distressed sales.
George Bennett, Principal Broker, GRI, ABR (Neath The Wind Realty) It is unfortunate. One bank in Atlanta just unloaded 130+ incomplete subdivisions this week.