Realtor Steve Presley is hardly the sort of person Doom would consider popping on the Resources list, but recently he submitted a short piece to our Ideas page that deserves a look. The theme is how calling the bottom of the RE crash / correction will be best done in retrospect.
Mr. Presley’s submission is a scaled down version of a recent post on his own promotional blog. I commend him for his editing on this occassion. He’s gone beyond "astroturfing" to give us something we can think about.
Doomers be warned, NAR has a strategy of "blogging for exposure", and this Realtor seems from a cursory scan of the internet to be something of an ace salesman in "pre-construction" and other of the more hard-core RE investment areas. That being said, Doom is open to comments and submissions from anyone who adds value to the discussion and respects "Doom Family Values". It’s highly unlikely we’ll be accepting very many submissions from the REIC, but this example might serve to get us thinking about when the bottom will actually become detectible.
"Looking in the Rear View Mirror", submitted by Steve Presley, Realtor
As I vacation in the mountains over the next few weeks, we have friends and business partners coming and going at different times to share the snow and the sites with us. There will be discussions ranging from family to the million dollar question: "When will we see the bottom of this real estate market?"
I often vacation at a time when I can reflect on the past year and start thinking outside the box as I formulate my ideas for next years’ goals. Back to that million dollar question, when will we see the bottom of this real estate market? I believe we are only going to see the bottom of it in our rear view mirror. Most investors will wait until the next stage of the real estate cycle to start investing again and will miss the bottom. Real estate investments should be made with a four year plan in place to ride the market based on good fact-based decisions about the market fundamentals. I believe from a macro view indicators like interest rates, weather, the stock market, current Fed rates and other things that impact real estate on a grand scale will only set the stage for primary markets to flourish. I am currently focusing on isolated markets that have strong fundamental bases with long term growth plans intact. The smart money is getting back into the real estate market now, while there are buyers’ market terms are available.
I doubt Doomers will want to let the above go without comment. As always, let’s keep it civil.
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Notes and References
[1]: "Goldman-Sachs Say Home Prices To Drop", The Chattanoogan, posted July 29, 2006. The emphasis in all the quotes is mine.
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More “we’re going to miss the bottom” talk. RE market bottoms span half a decade or more. If we miss it, we’re probably too clueless to try homeownership in the first place…
I’ll keep it civil, but I’m not sure what’s so novel about this realty agent’s post.
Many others have said we won’t know the “bottom” until we’re in retrospect, and IMO they’re probably correct. Otherwise, this strikes me as just another REIC spinner trying to convince us that the “smart money” is getting back into the market.
No it’s not. The only people getting back into the markets right now and for the rest of 2007 are “falling knife-catchers.” Whether those people are smart enough to realize that isn’t really my concern. As this housing bust has re-proven, there is almost no way to protect the stupid from themselves.
Sure, I’m all for opposing viewpoints on the housing market. But I think the MSM sidebars give us plenty of that.
– The Judge
“Remember, sell now or be priced in forever.”
Having experienced a real estate bust firsthand I’ll say this:
The bottom will last a long time, and I doubt that anyone will “miss it”. When every family member is telling you that you are an idiot to buy a house because they consider real estate to be a toxic cesspool, that’s “the bottom”.
“The bottom” will also last a number of years… Even when prices begin to tentatively rise again, it still won’t be too late to get in. Real estate recovery isn’t like missing Google’s IPO.
When people you overheard at the mall, movie theater and restaurant are using the phrase “real estate” as profanity… then we’ll have a good idea that the bottom is close.
As far as “smart money” and “investment” terms tossed about…
do the properties cash flow if I buy them w/ 20% down on 20 year notes? If not, they are not investments, but speculation.
I think we’re all agreed that RE “speculation” is not prudent at this time.
As for the phrase: “a four year plan in place to ride the market based on good fact-based decisions about the market fundamentals.”
Ummm… what the heck does THAT mean?!?!
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Oh… Judge… I LOVE that signature line!!!
People act like “finding the bottom” in a market is hard, but it isn’t. They’re quite easy to find — that’s when everyone has abandoned that market “forever”, believing it is beyond recovery. But this very fact is what makes it so hard to act optimally on that knowledge: the market is no longer popular so you’ll get chastised if you invest in it!
This herd behavior ensures that most people’s investment results in general are mediocre to bad, and only those who are both intelligent and independent will outperform.
The idea that the “bottom” is likily to be a long, stretched U shape rather than a V followed by rapid price run ups has been well dealt with by OC, Judge, and Spud. What is interesting to me is the “roles” we tend to accept from real estate salesman, here with “Steve” acting as an advisor on investment timing. The confusion is further promoted by realtors often self promotional labels as agents, brokers, advisors or “consultants”. I will call them all “agents”.
There may be a few “agents” who are also qualified financial advisors or financial planners, heaven knows those labels are not the equivalent of a highly educated and vigorously licensed “learned profession” like a CPA, RPE, MD or JD. Most agents appear to me to have no real qualifications to provide “investment advice” regarding real estate or anything else. The mere fact that someone would suggest an average, non-professional investor try to “time” precisely the “bottom” of any market reveals a lack of expertise. Real experts don’t do that because they realize it is difficult and risky, even for highly informed hedgies with big research staffs to play that game, let alone Bill & Mary Homeowner. The number of agents that are currently experiencing their own financial stress from their own misguided realty “investment” actitities is also evidence that getting financial advice from a salesman is problematic.
Agents play a solid role when they impart honest local information regarding housing availability and neighborhood characteristics. They obviously have a role in the “marketing” of a house for sale and can be helpful sorting through the MLS listings and, especially for out of town buyers,by previewing homes. The best ones focus on what their buyers want and their sellers need. They are frequently helpful when confined to the limits of their expertise.
Agents are not generally qualified appraisers, a suspect group in their own right, but thats another topic. While many people tend to rely on an agent for a so-called “market analysis” or other valuation issues, its odd that most agent provided forms will require buyer and seller to acknowledge that the agent “does not determine value”(AZ Form A106)and release agents from an “liability or responsibility regarding” any matter “relating to the value or condition of the Premises.”(Az RPC 8(o)). While we may listen to our agent tell us the house appears in excellent condition and is in a great, stable, neighborhood, other provisions of that agents recommended form contracts will require buyers to acknowlege that the agents as no duty, knowlege or expertise in these subjects.
And don’t even get me started about agents providing advice regarding the legal requirements associated with contracts or financing, in my experience the best say “I don’t know”. Over half who answer questions in this area for me are dead wrong, tending towards the “don’t worry, it will work out” or “we all do it” schools of “legal advice”. Perhaps thats how we got so many cash back deals in a tough market, who knows. Of course again, the agent’s forms will “disclose” that they warned you to “consult with an attorney, inspectors and experts of your choice” (AZ Buyer Attachment RPC). And while the multipage AZ Department of Real Estate Buyer Advisory is quite informative (read it!) it serves to futher list all the important things you agent really doesn’t do, despite the fact that many agents express opinions profusely on the very matters listed. And yes, at the end, you sign and acknowledge that you, not you agent, are responsible for “all necessary inquiries and consulting” prior to purchase of any propery.
There are alot of good, third party, impartial studies out there regarding real estate value trends and market predictions. Many, like the Global Insights, Moody’s or PMI studies are frequently referenced on this site. I have never recieved a copy directly from an agent in AZ, and many have never heard of these reports. Most appear to have no interest, but rather urged me to rely on their “years of experience” and “local knowledge” If your agent, (whether named “Steve” of not), has read these studies and can discuss these studies accurately and intelligently with you, then their advice may be worth listening to, giving due regard to their possible self-interest in any transaction.
In the final analysis, would you let even your favorite used car salesman manage you families finances or handle your investment portfolio? If he told you to invest a substantial portion of your net worth in a car he was selling, and do it now, before it went up becasue the “buyers market” was ending, would you be suspicious? Trust, but verify. And recognize the limits of expertise. I sure don’t want my lawyer doing surgery on me, and I don’t take investment advise from a realtor or a blog site.
Old Mike-
Smart move- a good axiom for free advice- “You get what you pay for!”
RE: Steve Presley’s blog
I have a hard time taking advice from anyone who doesn’t know the difference between “sites” and “sights” (and “out side” v. “outside,” “freinds” v. “friends,” etc).
I nearly choked on the Diet Coke I was drinking when I read that he’s decided to home school his own children. What successful real estate tycoon would have time for that?
I wouldn’t be surprised one bit if Mr. Presley was a poseur, instead of a pre-construction real estate millionaire.
NVMike -
I’m afraid I’ve got to take exception to that one. Although there’s a lot not to like about Mr. Presley, lack of polish in his blog posts isn’t really an issue. There are some awfully smart people out there who’s typing styles aren’t their strong point.
That being said, someone who combines astute analysis with excellent writing (Calculated Risk and our own Twist come to mind) is a pleasure to read. And someone who has great ideas but problems expressing them can always hook up with an editor.
John M.,
Before I wrote here, I read the entire main page on his blog and, to be frank, I couldn’t find one thing that impressed me.
In most cases with a new RE blog, I get the feeling: “this blogger is clever; I should bookmark and read this blog periodically,” but not in this case.
I honestly don’t see that he has anything unique to offer.
NVMike -
That is a more substantive assertion, and you could well be correct. My own reading on his site was quite sketchy. Steve Presley did take the trouble to post on our “Ideas” thread, and also cleaned up his work, relative to the original version over at his promotional blog. My judgement was that his little piece seemed quite representative of typical REIC attitudes, and therefore a good starting point for a discussion here. You will see if you compare the two versions that I still had to clean up his effort quite a bit.
My single point was to be careful judging a blogger’s work on style alone. I should have made it clear it is still possible to be illiterate and ignorant at the same time.
Point taken, John M.
I am not aware of ANY turnaround in real estate that happened in a short time. Most “bottoms” last 3-8 years depending upon the economy in general that accompanies the real estate cycle. For example Los Angeles housing prices got back to their 1991-92 prices in 2000. The transition from the bottom to the boom took a couple of years and was readily apparent.
There is no mystery or voodoo in real estate, it is supply and demand. The turnaround will occur when inventories decline significantly, days on market shrink, monthly unit sales increase and buyers start to bid up prices to get what they want.
The negative drivers are still there with more lurking on the horizon, and their are few positive drivers (lower i rates, declining unemployment, rising income, etc)and zero on the horizon.
I am a prospective buyer leasing a townhouse in Las Vegas but I see no reason to take money out of 15-20% mutual funds and put it in a dead horse…I mean house.
’07 will be worse than ’06 for sellers in my neck of the woods. Reality is just starting to sink in in Summerlin.