The Real Estate Market The True Story

Sometimes it's a curse to be burdened with being right all the time. Over the years I have amazed many of my family, friends and contemporaries with the things I have predicted. A large part of the burden is people tend to blame you for everything that goes wrong. In fact, I have two ex-wives and several former girlfriends, plus a current one, that will tell you it's almost always my fault. Just ask them! So accurate am I, that many that know me have taken to calling me by my other world name, Nostradumbass.

But today I want to convey to you a discussion I had back in 1995 regarding the future of real estate in this country.

Back in '95 I was a Sales Manager for one of the largest, privately held, real estate companies in the United States. It was a job I did well. I not only recruited and trained sales associates in my office but I also trained throughout the company at different times. I was one of their "go to" guys when it came to building an office up or making it profitable.

For those of you that don't remember the real estate market back in 1995 it was pretty darn good. We had just come out of the "Bush Senior" recession and the market was alive with a pent up demand. Homes and real estate experienced appreciation at a double digit rate in most communities, and it wasn't unusual to sell a home within a week of it hitting the market. All and all it was a good time to own and sell real estate.

I always kept things loose in my offices. There was a lot of joking and kidding, but my people were also the most Professional Realtors you could find anywhere. They had an insatiable thirst for knowledge because they understood that knowledge was power. And as such we would frequently discuss the current market, and the "what ifs" about the market as well.

I recall one day towards the end of the weekly sales meeting we got into a discussion about what the market would look like 10 years from now (1995).

I remember watching my Associates jaws drop and they looked at me like I was on recreational drugs when I said "at some point in the next 10 to 15 years the bottom was going to fall out of the market". I went on further to say; "When it happens I will feel bad for all of these people today, especially the young people, that are over extending themselves to buy these $300, $400 and $500 thousand dollar homes because they were going to take the biggest hit".

Of course even though they chuckled in disbelief, they did understand I was "Nostradumbass" and, therefore, they respected my opinion so they asked me to elaborate. Now before I go farther, let me say I did not foresee the man made energy crisis, nor 9/11, nor had any thought about our latest recession that borderlines a depression. None of these factors came into play, it was merely the basic laws of supply side economics.

I explained to them that within the next 10 years the "baby-boomers" were going to start to retire and as such they would begin a massive exodus to downsize and migrate. In doing this there would be a tremendous void left in the high end of the market place and when this happens the only result will be a glut of product and falling prices.

I could see the light turn on as I reminded them that the "baby-boomers", with a demographic population somewhere in the neighborhood of 78 million people, were about twice the size of the "Gen-X'ers" which was estimated at about 41 million people. Then behind them the next two generations combined barely equal the "baby-boomers".

When you start to realize that at some point there will be 75 million homes for sale with approximately 50 million buyers, what do you think the end result will be? Of course they said falling prices.

And that is what we are watching and experiencing today. You can blame the sub-prime mortgages, the banks, the auto industry, Bush, Obama, oil, politics, foreign cars or Larry, Daryl and Daryl, and you'd still be wrong.

The culprit simply is too many homes and not enough buyers. It is the basic principle of supply and demand, and that isn't going to change any time soon. The irony is, it isn't going to change because the real estate market is as much to blame for people being unemployed as anything else. The politicians can stimulate us all until we're orgasmic but until people are employed with a good paying job they won't be buying houses any time soon.

For those of you waiting for the market to turn around, for your home to regain the value and equity it once had; I hate to be the bearer of bad news but it you don't have at least ten years, you've got a problem. Or at the very least a tough decision to make.

Because even if this country gets back to work, with unemployment down to a respectable 3%, the basics will not change. You have workers, in this new "green" society that the Republicrats are molding, that will earn about 2/3 of what their parents did. That fact alone works against any rapid recovery of home prices because they flat out can't afford that $400,000 shack mom and dad owned. Secondly if you have 100 hamburgers for sale and only 10 people hungry, the odds are pretty slim you're going to sell more than 20 burgers. The best thing the government could do, if they really want to help the homeowners, is plow down those foreclosed homes. At least then you would reduce some of the inventory.

It's a bitch always being right! Well wait, I can think of 3 or 4 times I made a mistake......