As I was driving somewhere today, I heard a voice come out of the radio about housing sales being up about 2% in September. Now they really didn't say if they were up from August, or up from September last year, but at least they were supposedly up from something!
While I continued to cruise along thinking about how great this was, and imagining SOLD riders springing up on For Sale signs faster than buyers could gas up their cars, I switched radio stations and heard another voice mentioning that home values are at the same level that they were in September of 2004. And someone told me last week that they heard this whole housing thing was supposed to pick up in the 3rd quarter of 2023.
In just five or ten minutes of watching CNBC or FNN, you will get a similar array of stupidity from an endless parade of experts regarding the stock market and the financial mess. The political process is worse yet, with hour long debates from a cast of characters about "Joe the Plumber!"
Jon Stewart, of The Daily Show, may have done the best job on this nonsense with his bit piece this evening on political analysts called: "Who the "BLEEP" is This Guy?"
It seems to me that the rate of consumer indecision correlates directly to the number of analysts spewing out garbage at any given point in time. In fact, I may attempt to prove that in a theorem, since the real estate market is still a bit slow from what I've seen. Although, then I suppose I would have to think up a good name for it, because no one wants to go through the trouble of creating a time consuming theorem without giving it a catchy name!
Look at the Pythagorean Theorem. Now that's one catchy name for a theorem! Athough, it didn't hurt that he already had kind of a fun name as Pythagoras. Parents just seemed to be a lot more creative with names back then.
And wouldn't you know it, there's already an Anderson's Theorem. I suppose that if this real estate market picks up any more I might just have to name it Dan's Theorem to save some time. I don't think there's one of those yet.
Maybe someday analysts will get paid based on merit and how accurate they are with their prognostications, and maybe then we will be able to believe them. But until that time we will have to make political decisions, investment decisions, and real estate decisions based on incessant babble from talking heads...or on our own gut feelings.
Oh...gotta go. ABC News just called and they're having a round-table discussion tomorrow morning that includes all the people with eight letters in their last name, and how that relates to your lifetime earning capacity. Hopefully, I can get a few words in because I have some pretty strong opinions on this subject!
Monday, October 27, 2008
Friday, October 10, 2008
Here's A Thought
Well, I really wanted to get off this stock market stuff this week, but it seems to be taking center stage in our lives. Every day they tell us we lost another Trillion Dollars or so...but I'm really not sure where it went!
Maybe we are just dealing with "funny money" here. Not that it's funny how everyone is losing their retirement accounts and other supposedly safe investments, but how did we really get here? I imagine that a good part of it stems from the idea that we should be able to make a buck from someone else's actions - but it just doesn't seem to work that way.
What I'm talking about is this...
When I built my real estate business, or when the guy down the street started his hardware store, we each had to put a lot of money, time and hard work into making a profit. There were no guarantees other than looking at similar businesses that seemed to be making money, and trying to run our businesses as well - or better - than they were running theirs.
If we did have some extra money at the end of the month, we generally put it back into our business in the form or advertising, capital improvements, or other investments that we thought would help us grow - and sometimes we needed to borrow money to accomplish these same things - but if we were to succeed or fail, it would be our doing. We firmly believed that no one could make us more money that we could make ourselves!
Somewhere along the line things got a little bit blurred. Instead of people wanting to start businesses and build them from scratch - mutual funds, stocks and all kinds of fancy investment vehicles began offering returns that were out of sight. What sense did it make to work 20 hour days to create a successful company when you could just invest in one (or several through a spectacular fund) that paid back 50%, or more, on returns last year? Why not let someone else do all the work?
That is what a lot of people did. And many of the whiz-kids who were handling once-safe retirement accounts decided to do that too!
Hedge fund managers and others in high finance made tens of millions, if not billions, managing all this easy money. But everyone kind of forgot what the money was for.
The reason the money was even there in the first place was to invest in little companies (like yours and mine) that grew to be bigger companies over time because of our hard work. We may have brought in an investor or two during our early years who truly believed in our vision and wanted to be a part of our growth. But as we got bigger, most investors didn't even know what our vision was anymore...however, they were sure that the money manager they put their $50,000 nest egg with understood it completely.
And, of course, now that we worked and worked to get our little businesses to a level that might sustain our kids' college educations and our retirement, our little businesses are having a hard time making money because no one has anymore to spend. All the people who invested in the big companies - hoping to create their own nest eggs for college and retirement - have an egg or two missing. And the nest, itself, is getting a bit tattered.
It might not have been a bad idea for the government to hand out $100,000 loans last week to the little guys and gals who would build their own businesses from scratch, instead of throwing $700 Billion into the "abyss" like they did. That would have been enough to get about 7 million motivated people up and running...and in control of their own destiny!
Maybe we are just dealing with "funny money" here. Not that it's funny how everyone is losing their retirement accounts and other supposedly safe investments, but how did we really get here? I imagine that a good part of it stems from the idea that we should be able to make a buck from someone else's actions - but it just doesn't seem to work that way.
What I'm talking about is this...
When I built my real estate business, or when the guy down the street started his hardware store, we each had to put a lot of money, time and hard work into making a profit. There were no guarantees other than looking at similar businesses that seemed to be making money, and trying to run our businesses as well - or better - than they were running theirs.
If we did have some extra money at the end of the month, we generally put it back into our business in the form or advertising, capital improvements, or other investments that we thought would help us grow - and sometimes we needed to borrow money to accomplish these same things - but if we were to succeed or fail, it would be our doing. We firmly believed that no one could make us more money that we could make ourselves!
Somewhere along the line things got a little bit blurred. Instead of people wanting to start businesses and build them from scratch - mutual funds, stocks and all kinds of fancy investment vehicles began offering returns that were out of sight. What sense did it make to work 20 hour days to create a successful company when you could just invest in one (or several through a spectacular fund) that paid back 50%, or more, on returns last year? Why not let someone else do all the work?
That is what a lot of people did. And many of the whiz-kids who were handling once-safe retirement accounts decided to do that too!
Hedge fund managers and others in high finance made tens of millions, if not billions, managing all this easy money. But everyone kind of forgot what the money was for.
The reason the money was even there in the first place was to invest in little companies (like yours and mine) that grew to be bigger companies over time because of our hard work. We may have brought in an investor or two during our early years who truly believed in our vision and wanted to be a part of our growth. But as we got bigger, most investors didn't even know what our vision was anymore...however, they were sure that the money manager they put their $50,000 nest egg with understood it completely.
And, of course, now that we worked and worked to get our little businesses to a level that might sustain our kids' college educations and our retirement, our little businesses are having a hard time making money because no one has anymore to spend. All the people who invested in the big companies - hoping to create their own nest eggs for college and retirement - have an egg or two missing. And the nest, itself, is getting a bit tattered.
It might not have been a bad idea for the government to hand out $100,000 loans last week to the little guys and gals who would build their own businesses from scratch, instead of throwing $700 Billion into the "abyss" like they did. That would have been enough to get about 7 million motivated people up and running...and in control of their own destiny!
Saturday, October 4, 2008
All's Fine Now!
Well, now that the bailout bill has passed, we should be heading full steam ahead. Although, I think I noticed a slight blip in that based on the Dow yesterday.
Back when I was doing a lot of stock trading in the late 90s, I remember how common it was to see the market drop instead of going up on good news. Not that the bailout is all "good news" for everyone, but many of those in high finance have been touting it as such. The reality is that, because it has been talked about for so long, it has already been factored into the market - and the stock market has become more of a knee jerk index based on immediately released news.
However, my specialty is real estate instead of stocks, so I'll try to stick with that from now on. The funny thing here is that our sales have seemed to be stronger during the past month than they have been for most of the year. Either people are just getting sick and tired of letting the bad economic news kick them around...or maybe we are in the beginning of a recovery.
Let's let the pundits battle back and forth on the news networks, while we quietly start getting the real estate market moving again without them noticing.
Dan
Back when I was doing a lot of stock trading in the late 90s, I remember how common it was to see the market drop instead of going up on good news. Not that the bailout is all "good news" for everyone, but many of those in high finance have been touting it as such. The reality is that, because it has been talked about for so long, it has already been factored into the market - and the stock market has become more of a knee jerk index based on immediately released news.
However, my specialty is real estate instead of stocks, so I'll try to stick with that from now on. The funny thing here is that our sales have seemed to be stronger during the past month than they have been for most of the year. Either people are just getting sick and tired of letting the bad economic news kick them around...or maybe we are in the beginning of a recovery.
Let's let the pundits battle back and forth on the news networks, while we quietly start getting the real estate market moving again without them noticing.
Dan
Friday, September 26, 2008
So, What's Next?
As we all wait for the big "bailout" decision on whether the markets are going to come tumbling down - or if life is going to be filled with nothing but sunny days ahead (I suppose that won't help global warming) - people keep asking me, "What is this going to mean for the real estate business?" My answer is generally something like: "I don't know." But secretly I find myself thinking more like: "I don't really care!"
It's not that I don't care about the economy being strong and people being able to afford houses and other necessities; I'm in that same bunch of people, and my income is certainly dependent on home buyers being able to get loans. But it seems that every time the government tries to fix something, they make something else worse.
Now, as I've said before, I'm not an economist. I really don't know how all this works. But I've been in the real estate business for a long time, and from what I remember the economy seemed a little more stable when interest rates were a few points higher. It might not have been quite as easy for home buyers or for businesses to borrow money, but they also may have been a little more cautious when they did do it.
As the Fed has gotten more involved in easing the availability of credit to give the impression of strong economic growth, we have seen a run-up in real estate values like never before. I have been of the opinion for quite a few years that there was no way to sustain this "false real estate market" that was built on "feel good" interest rates. So, I believe that we got what we paid for...or, perhaps, what we didn't pay for!
Sellers also bought into this feel good atmosphere by thinking that these good times were never going to end. Those who used to be happy with 5% appreciation on their homes each year later decided that even 20% yearly appreciation wasn't enough, because money was cheap and everyone wanted more real estate. Home prices got out of hand, and the ocean of buyers turned into a wading pool.
This is the part of a Free Market Economy that is still totally free. Buyers are free to buy; sellers are free to sell; and real estate prices are free to fluctuate based on supply and demand - without government interference. And that is what they have done...coming down to levels we have not seen in several years.
So let's let the chips fall where they may, and maybe we can all get back to normal again. Whatever that may be!
I'm guessing there will be some kind of bailout plan that gets approved fairly soon, and some of those big exec's will only get 10 or 20 million dollars instead of 50 million for their severance packages. And with savings like that, it should only take about 20 or 30 thousand of those kind of salary reductions to make up the 700 billion dollars we need. Or, they could just get 70 million of us little guys to throw in $10,000 each.
I guess they should have called me in on that big meeting at the White House yesterday.
Dan
It's not that I don't care about the economy being strong and people being able to afford houses and other necessities; I'm in that same bunch of people, and my income is certainly dependent on home buyers being able to get loans. But it seems that every time the government tries to fix something, they make something else worse.
Now, as I've said before, I'm not an economist. I really don't know how all this works. But I've been in the real estate business for a long time, and from what I remember the economy seemed a little more stable when interest rates were a few points higher. It might not have been quite as easy for home buyers or for businesses to borrow money, but they also may have been a little more cautious when they did do it.
As the Fed has gotten more involved in easing the availability of credit to give the impression of strong economic growth, we have seen a run-up in real estate values like never before. I have been of the opinion for quite a few years that there was no way to sustain this "false real estate market" that was built on "feel good" interest rates. So, I believe that we got what we paid for...or, perhaps, what we didn't pay for!
Sellers also bought into this feel good atmosphere by thinking that these good times were never going to end. Those who used to be happy with 5% appreciation on their homes each year later decided that even 20% yearly appreciation wasn't enough, because money was cheap and everyone wanted more real estate. Home prices got out of hand, and the ocean of buyers turned into a wading pool.
This is the part of a Free Market Economy that is still totally free. Buyers are free to buy; sellers are free to sell; and real estate prices are free to fluctuate based on supply and demand - without government interference. And that is what they have done...coming down to levels we have not seen in several years.
So let's let the chips fall where they may, and maybe we can all get back to normal again. Whatever that may be!
I'm guessing there will be some kind of bailout plan that gets approved fairly soon, and some of those big exec's will only get 10 or 20 million dollars instead of 50 million for their severance packages. And with savings like that, it should only take about 20 or 30 thousand of those kind of salary reductions to make up the 700 billion dollars we need. Or, they could just get 70 million of us little guys to throw in $10,000 each.
I guess they should have called me in on that big meeting at the White House yesterday.
Dan
Thursday, September 18, 2008
WOW...What About the Dow!
In real estate, the stock market can have a huge effect on peoples' motivations. I remember being out with a buyer after one of those big drops in the late 1990s. The lake home we were looking at was around $400,000, and he told me he had "just lost one of those in the last few weeks."
Of course he meant he had lost that much money, but it was obvious that a cabin of that price would not have gone to zero value like the stock did. So he was looking for better places to park his money, and he figured lake property was probably the best place at the time.
Over the past few days, we have had several calls come into our agents from potential buyers saying the same types of things: "I'm getting slammed in the stock market, so I want something tangible that I can hold onto for a long term investment." And as far as real estate goes, waterfront property and acreage is probably about as good as it gets for an investment.
I know there have been plenty of people who have been hurt financially throughout these past couple of years (many Realtors included), not only with the downturn in real estate values, but also with the high cost of goods that has eaten into their discretionary income. Many of these folks are not able to even think about buying anything like real estate right now. However, there are still a lot of people holding onto a pile of cash, and those might be the ones who will get this market moving again. With prices so low, they are probably thinking that these types of properties might be one of the safest places to be, even if the economy gets worse.
Whether the Dow goes up 400 points a day, or down 500 points, there is a lot of uneasiness in the economy right now. So unless you're a day trader, maybe real estate and especially a lake cabin - isn't a bad idea for the long term. And it's a lot prettier to look at than a stock certificate!
Of course he meant he had lost that much money, but it was obvious that a cabin of that price would not have gone to zero value like the stock did. So he was looking for better places to park his money, and he figured lake property was probably the best place at the time.
Over the past few days, we have had several calls come into our agents from potential buyers saying the same types of things: "I'm getting slammed in the stock market, so I want something tangible that I can hold onto for a long term investment." And as far as real estate goes, waterfront property and acreage is probably about as good as it gets for an investment.
I know there have been plenty of people who have been hurt financially throughout these past couple of years (many Realtors included), not only with the downturn in real estate values, but also with the high cost of goods that has eaten into their discretionary income. Many of these folks are not able to even think about buying anything like real estate right now. However, there are still a lot of people holding onto a pile of cash, and those might be the ones who will get this market moving again. With prices so low, they are probably thinking that these types of properties might be one of the safest places to be, even if the economy gets worse.
Whether the Dow goes up 400 points a day, or down 500 points, there is a lot of uneasiness in the economy right now. So unless you're a day trader, maybe real estate and especially a lake cabin - isn't a bad idea for the long term. And it's a lot prettier to look at than a stock certificate!
Wednesday, September 17, 2008
This Year's Market
Last night I had a request for information on how the lakeshore market turned out this year. Of course, it isn't over yet, but generally we would start seeing a reduction in sales about now.
The odd thing this year is that we've had an increase in sales all of a sudden. I remember a market like this in 2001, where not much sold throughout the summer, only to have a real influx of sales in the fall. I don't really remember what waterfront real estate prices were like overall that year (they certainly were cheaper than what they are now), but what probably happened is similar to what has gone on this year.
In a normal market, the buyers start to emerge in early spring and get excited about the thought of having a new lake place. Time is of the essence, because summer is short and most people aren't very good about delayed gratification. So they buy fairly quickly, understanding that more properties might be coming on the market - but the loss of not having it to use is greater than the gain of maybe finding the perfect one sometime.
It's no secret that the last couple of years has been tough on the real estate industry overall. The uneasy feeling in the economy, combined with the difficulty in getting loans, the high price of gas, and the run-up of real estate prices a few years ago, made a lot of people step back and think a bit before jumping into any more things they don't absolutely need.
I'm going to try harder to answer this question in another month or so, but what I kind of see happening now is that we have bottomed out (for some time now), and we are just waiting for a little bounce. That bounce may come from investors who understand that prices for lake homes and cabins are very low in relation to other goods, or it may come from the ever-expanding base of Baby Boomers who decide it's time to make a move.
Either way, most agents around the country tell me that their sales have picked up over the last month - and we are seeing that too.
The odd thing this year is that we've had an increase in sales all of a sudden. I remember a market like this in 2001, where not much sold throughout the summer, only to have a real influx of sales in the fall. I don't really remember what waterfront real estate prices were like overall that year (they certainly were cheaper than what they are now), but what probably happened is similar to what has gone on this year.
In a normal market, the buyers start to emerge in early spring and get excited about the thought of having a new lake place. Time is of the essence, because summer is short and most people aren't very good about delayed gratification. So they buy fairly quickly, understanding that more properties might be coming on the market - but the loss of not having it to use is greater than the gain of maybe finding the perfect one sometime.
It's no secret that the last couple of years has been tough on the real estate industry overall. The uneasy feeling in the economy, combined with the difficulty in getting loans, the high price of gas, and the run-up of real estate prices a few years ago, made a lot of people step back and think a bit before jumping into any more things they don't absolutely need.
I'm going to try harder to answer this question in another month or so, but what I kind of see happening now is that we have bottomed out (for some time now), and we are just waiting for a little bounce. That bounce may come from investors who understand that prices for lake homes and cabins are very low in relation to other goods, or it may come from the ever-expanding base of Baby Boomers who decide it's time to make a move.
Either way, most agents around the country tell me that their sales have picked up over the last month - and we are seeing that too.
Tuesday, September 16, 2008
A New Blog Format
After quite a few months of being the headliner on this blog, I thought it was only fair to bring Sandy in on it. She may not be as interested in writing the articles (although you can probably tell I haven't been that interested over the summer either), but she certainly knows the business and might decide to throw a few important thoughts your way.
Anyway, it is now "our" blog, so please let us know if you have any items you want us to cover. I personally think it is easier to keep the entries a bit shorter so that we can keep current information coming at you more often. At least we'll do our best!
Thanks for visiting,
Dan
Anyway, it is now "our" blog, so please let us know if you have any items you want us to cover. I personally think it is easier to keep the entries a bit shorter so that we can keep current information coming at you more often. At least we'll do our best!
Thanks for visiting,
Dan
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