There are two camps when it comes to promoting the truth in business. One camp cares deeply about their industry, the people that make up that industry, and their clients. The other camp pretends to care, but only if the result personally benefits them – their ego or their pocketbook. We see examples of this every day in every industry – politics, banking, sports, retail, and yes, real estate.
Marketeers and salespeople are storytellers. Often the difference between fiction and non-fiction is a fine line. But numbers don’t lie. In 2008, when the global financial crisis rocked worldwide markets, I went on the record saying real estate would see a massive reckoning in the months to come. The real estate market had fallen off a cliff. Within weeks of the October crash, the market was down at least 20% in pricing and the trades came to a standstill. When the article was published, I received calls from other company owners berating me for my “irresponsible action” by not toeing the industry line. I was supposed to say that everything was fine. What we were seeing was only a minor correction, and we would quickly bounce back. But I knew that was bullshit. Apparently, it would have been better if I had just lied and we all simply kicked the can down the road until things recovered. The idea was that markets are driven by consumer confidence, and the more we can bolster that confidence, the stronger the market would be – but that is not how it works.
This is another one of those moments in time – with some major differences. We now have more accurate data points, and the consumer is much more sophisticated and educated. And while there is more real-time transparency, a lot of the data is slow to arrive. It will always lag because of the nature of a transaction. Closed sales don’t reflect a current market. One true barometer of a market is contract signed information, but a closing usually occurs 30 days to two years after a contract is signed, so that only really works when we have the luxury of hindsight and can analyze the contract signed date post-closing. In addition to this, a number of agents don’t report or announce their signed contracts, so it’s impossible to report accurate absorption information.
The most insight one can get about the current state of the market is from those on the frontlines – the real estate agents. They have a direct line to both the buyers and sellers. And good agents always know if something is overpriced or a steal. It’s usually the client who is in denial.
This past week I received an onslaught of calls from people wanting to know where the market is and where it's heading. Honestly, I have no idea. There are just too many unknown variables. But there are a lot of people out there right now incredibly happy to spin rosy tales of a soon-to-be booming recovery. They are talking about a V-shaped recovery, a fast return to consumer confidence and potentially higher prices. They are saying that people staying in their houses all day will be eager for new scenery, and therefore, ready for a new home. People will be looking to get their money out of the stock market and into a hard asset. I’ve heard it all this week.
I am an eternal optimist, but all this is wishful thinking at best. Yes, our first quarter reports showed a robust January and February. This was in large part due to long overdue price adjustments sellers made prior to the pandemic. You don’t have to be a genius to figure out that March, April, and May will be dismal. The world is shut down, people have seen massive losses to their businesses and personal portfolios, and people can’t go out to even look at homes. We can also certainly assume that prices will be lower when we come out of this. Spoiler alert – The overpriced property that was on the market prior to this pandemic will not suddenly sell for the same price (or more) when this passes.
We make money when deals transact – not when we list a home and place it on the market. It makes no sense to me to collect listings that never sell. That is a waste of everyone’s time. On the flip side, we need to stop lying sellers, so they like us more. My job is to sell your home for the best price in the current market. If you are looking for someone to tell you that your $3M home is worth $5M, I am not your agent. You should find that type of flattery from your friends or your mother, but not your agent. And in this market, agents have a responsibility to be honest – for the betterment of the industry. To really get things moving again. The good, honest agents will make this recovery happen, and the others with their pie-in-the-sky predictions and ego-stroking will only delay it for everyone. It’s our job to call those people out, be honest with our clients, and see this recovery through. It’s on us. So do your homework now, speak to your clients regularly, and be ready to help when the world resumes.