What, me worry?

Spain’s debt downgraded.

Stocks in Europe, Canada and Brazil decline

EU drops economic outlook for 2009

Fiat threatens to return to U.S.

These four headlines were just collected from today’s news (alright, the last one about Fiat is, although true and undoubtedly frightening confirmation of our impending status as a Third World country,, mostly included as a joke). Just as gloomy news was around last week, for those who bothered to look, but you’d never know it from current real estate prices. I was working this morning on finding some reasonably priced properties and was struck, yet again, with how many sellers are still convinced that their houses and land have increased dramatically in value since 2006. What are they drinking?

I would guess that these people are just holding on, part of the mass-hysteria that believes that the Obama will pull the country from its economic malaise and return us right quick to prosperity. Last through the spring, the reasoning goes, and we’ll be back where we were when times were good. Even the EU itself seems to believe this – its depressed forecast for 2009 is followed by a stated belief in a come-back in 2010. This might be more encouraging if today’s communication hadn’t been  issued to correct its more optimistic forecast made just two months ago. If they can’t get it right over 60 days, do you trust them to predict accurately what conditions will be like in 450?

I don’t wish to add to another hysteria, the one that fears the sky is falling, but if I were trying to sell my house now I would price it based on an assumption that property will be worth less a year from now, rather than more. Certainly, that’s what buyers are figuring. If you and the buyer aren’t on the same page of that expectation, there will be no meeting of the minds and no sale. So either reduce your price and sell, or pull your place from the market and wait for the rebound that will prove buyers wrong.

Or just keep your house in showroom condition and let tire-kickers disrupt your schedule. Some would-be sellers are happy with seeing that kind of activity because it lets them pretend that something’s happening. It doesn’t work for me, but we’re all different.

3 Comments

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3 responses to “What, me worry?

  1. Retired IB'er

    Funny, the more I see of human behavior, the more I realize how universal clichés truly are: you can lead a horse to water, but you cannot make him drink.

    Unfortunately, Chris, your sage advice will be lost on most; and worse, later, many will hide behind “whocouldaknow’d” in an attempt to excuse their irrational actions.

  2. Towny

    “whocouldaknow’d”:

    We “knowed” for at least the past 15 years.

    The “great minds” in DC created this out of thin air. And continue to create.

    Corrections have to occur. Artificial stimulation for political expediency is outright criminal. The only way to save this economy is to decrease m3.
    Too much cash/leverage is still floating around. Even with half a point at the window, the economy is stopped and (so far)stayed stopped -dead in its tracks.

    Then again…..maybe this is what the “great minds”
    planned. After all, America runs “the bank” of the global economy. Couple of years from now Breton Woods may be kicked to the curb…….then what? 10 million dollar Obama notes?

  3. anonymous

    Agree, Chris, it’s always difficult being an honest messenger (let alone a competent advisor), telling clients what they might not want to hear

    Anecdotally, know many 30-something hedgies who have rented for yrs (always ambivalent about illiquidity/investment logic of real est; were single and could easily rent new condos in Manhattan or SF, etc)….now, many are considering building in Greenwich when dust settles a bit…but view a newly-built house as needed family shelter, not an investment…sort of like a new car is needed, obsoleting, disposable, depreciating transportation

    Unfortunately, in my expce, most otherwise intelligent financiers are incredibly irrational when it comes to various issues of personal life, of which I include purchase or building of primary residence, as well as marriage/divorce/kids, etc….