The state of the real estate market
by Scott Swick
As I was thinking about what to write this week about the “real state of the real estate market” here in
His “momma,” played by Sally Field, always had just the right thing to say that was so simple, yet so wise. In a time when the housing market seems so frustrating and confusing, perhaps Forrest’s momma can give us some much needed wisdom.
Home affordability is high – but buyers are slow to move
Here we are in the best buyer’s market in 50 years. Home prices have fallen significantly since the housing bubble popped in 2006. As a result, the affordability index (income vs. home price) is at an all-time high, meaning people are more able to afford a home now than any time since the Great Depression. Homebuilders’ prices are at 1999 levels. Interest rates are below 5 percent, also an all-time low. There are a ton of financing programs available to people who don’t have a lot of money for a down payment. Banks are now advertising to win over buyers because they have plenty of money to lend. Unemployment is falling, jobs are more secure, and raises may be smaller but are being offered again.
And yet buyers are slow in coming. What’s going on? What would Forrest Gump’s momma say to us right now?
What would Forrest’s Momma say?
“Momma always said you got to put the past behind you before you can move on.” This is true for both first-time homebuyers and those who have a home to sell before buying a new one. We call these people “move up buyers.”
The first-time homebuyers sat and watched the fallacy that “your home is an investment” get exposed as the falsehood it is. Since the go-go times of the ’80s, ’90s and early 2000s, homes appreciated so quickly that we began to think of them as our personal piggy bank. Rather than saving for what we want, we could go out and buy whatever we pleased. When our credit cards got too high, we would just re-finance our house and pay off the debt…only to do it all over again. When home prices sank, most of our personal net worth evaporated. The Gen Yer’s (late 20- and early 30-year-olds) don’t want to repeat that…so they wait.
But they need to realize they don’t have to repeat the mistakes of the past and they can move on buying a home that is more affordable than they will ever again see in their lifetime. What a shame if they miss out on this window.
And the move up buyers need to put aside the past mistakes and realize it’s not the same market anymore. Better to break even or take a smaller loss now so you can buy a home that also has dropped in price. Rather than hanging onto past prices, lower your home price until it sells and take advantage of the equity that will quickly grow with the new house. If you are buying a bigger home, you will more than offset your losses. Or if you really want to grow your equity, build a new home and enjoy virtually no maintenance costs for the next 10 years.
Rather than be embarrassed, remember what Forrest’s momma said, “You’re the same as everybody else. You’re no different.” So it’s time to move on with your life.
Think like a business – your home is your product
When young Forrest met Jenny on the bus she asked him if he was stupid or something. Forrest replied, “Momma says stupid is as stupid does.” In other words, being stupid is not a state of being, it is an action we mistakenly take… which is something we all can relate to.
In this market, it would be silly to think you can sell your home using the same tactics as in the past. Maybe you sold a home 5, 10 or 15 years ago. You set a price, cleaned up a bit, and waited for the offers to come in.
Today, you have to think like a business owner: how can I provide a product (my home) that is better than anyone else’s, with a better “guarantee,” packaged more attractively, at a price lower than my competition? So now the best way to sell your home starts with getting a pre-inspection so you can fix everything that is wrong so it doesn’t turn off a buyer. You clean it, re-paint it, and you hire a professional stager to make your home look like a Pottery Barn catalog. You offer a home warranty, and you price it below any comparable home on the market.
Fortunately, for those who do these things, their home sells. With fewer buyers, these are the ONLY homes selling right now. You have to make incredibly smart moves to get your home sold vs. your neighbor’s.
“Momma always said you can tell a lot about a person by their shoes: where they’ve been and where they’re going.” Put on the shoes of a “business owner” and make your home the best value in the neighborhood. I can tell you story after story of how this strategy really works.
Make your own destiny
Mrs. Gump said to Forrest on her deathbed, “I happen to believe you make your own destiny. You have to do the best with what God gave you.” When Forrest asked what his destiny was, his motherreplied, “You’re gonna have to figure that out for yourself. Life is a box of chocolates, Forrest. You never know what you’re gonna get.”
You, me, all of us, have to make our own destiny. We can’t just wait around to see what we’re going to get. We have to do the smart things that will benefit us — and the economy to boot. If buyers can forget about the past and move on and start the buying process, they make their own destiny. If sellers can make the smart moves to set their home apart, they too make their own destiny. And the result is that the housing market will get moving again.
"We’re not strangers anymore." Find an agent you can trust
When Forrest was getting on his first bus ride to kindergarten, he said to the bus driver, “Momma said not to be taking rides from strangers.” She knew you have to work with someone you can trust. Don’t get taken for a ride. Choose a real estate professional that can help you navigate the most tumultuous housing economy since the Great Depression.
Find an expert in the market, in selling homes, in buying homes. Interview several realtors to find out which one will be the best for you. Once you do, you can say what young Forrest said, “Well, now we’re not strangers anymore.”
This article was originally printed in the fdlreporter.