RISMEDIA, Oct. 20, 2008- had one of the best articles I have read in a long time about the true state of the real estate market. It focused on the power of emotions. I wanted to share some of their comments mixed in with my own commentary on the Raleigh real estate market.
Fear is a powerful motivator. It can drive banks to failure, nations to war and people watching their growing waistlines to put down that third slice of pizza.
Extreme fear, mixed with hope, was behind recent manic gyrations in the world’s stock markets and has been the only reason why the buyers and sellers in Raleigh are real estate frozen. The Raleigh real estate market has so many buyer and sellers both wanting the same thing, a new home. Yet fear is keeping them from moving towards one today when the interest rates are low and the inventory is plentiful. Interest rates are expected to grow to 8% next. Whatever the buyer thinks he will save by waiting will cost him triple with a higher interest rate. Most buyers never calculated the cost of waiting. They will be shocked when they realize that the $10,000 they thought they would save by waiting actually cost them $200 more per month in a payment which equals a $72,000 loss over 30 years. It is sad for me to watch FEAR keep buyers from making a great investment decision. Remember in 1990 when the media said, “don’t buy real estate”. I bet everyone who bought in 1990 is very glad they did. 15 years of incredible appreciation is what they were able to take to the bank.
Hope also is a powerful motivator.
To think, the financial crisis gripping us today started when people imbued with hope purchased homes they could not afford. That misplaced emotion led to a massive housing market bubble.
The bubble started bursting in other markets two years ago. It appeared for awhile that Raleigh was not going to suffer because of our healthy economy. The reality is the Raleigh real estate market had a small bubble burst last June. By comparison it should have remained very small but, fear is making it bigger every day. We have many sellers struggling to sell and buyers afraid to buy for unrealistic reason caused by false fear.
The media and the financial districts both live together in New York. Doom and gloom live next door to each other. They see each other daily at the local pubs, delis and subways. Doom loves gloom because it sells their air time and the fall out for Raleigh of doom and gloom spending so much time together in New York is buyers missing great houses and seller growing weary by waiting.
I just spent three days at a Mastery Weekend event with top REALTORS from all over the country. I spoke to agents from New York, Florida, Nevada, California and Virginia that reported 50 to 80 percent of their sellers are in short sale. The Raleigh real estate market is nowhere close to those numbers. Short Sales have grown but, I am only experiencing approximately 8% of my market. We did not have a bubble because our appreciation rates have always been steady. Raleigh real estate is experiencing a ripple effect but it is small by comparrision.
In September Raleigh was ranked as the 7th best real estate market in the country. I am so thankful to be living and working in Raleigh! In spite of fear I have had several homes sell recently with multiple offers. I also have others that sit and wait for no reason other than fear. Great houses, perfect condition, priced well and not sold because buyers are frozen with fear.
Anger, is also at play in the Raleigh real estate market.
It was a seller’s market 18 months ago and it is a buyers market now. The industry always fluctuates between those two groups. As a result, buyers and sellers deal with different emotions depending on which way the pendulum is swinging.
Buyers are afraid to buy because they think prices are going to go down more and sellers are really angry. Sellers express anger by saying things like, ‘My neighbor got $50,000 more for their house a year ago. Why can’t I get that now?” “What are you going to do to sell my house?” “Why won’t buyers make an offer?” “I am going to take my home off the market and wait”.
By contrast, a year ago, it was buyers who were “really angry because prices were so high. Buyers found themselves competing with other buyers for the same house driving prices even higher. They experienced the frustration of losing homes they really wanted in bidding wars with other buyers. Starting over to find another home with time pressures caused by relocation or pending sales date on their existing sold home.
While many buyers are afraid to purchase too soon, those that do make a bid on a home become very cocky. They come in with low-ball offers and they ask for everything! They want everything fixed, and they expect a low price too.
Desperation, of course, is another powerful motivator.
Amid financial chaos and the volatility of world stock markets, it is puzzling, yet somehow reassuring, that the most powerful forces controlling our economic destiny happen to be our own emotions. Isn’t it time to get them in check before our country implodes? We have the power to control our emotions.