Phillip's Blog

Real Estate Reality…what’s ahead for us?

By Phillip Cantrell October 3, 2008

In the highly charged and uncertain environment of our industry, every day brings a new knot to the stomach of most real estate broker/owners. Soon as we get over one dose of bad news from the media, here comes another. Some days I ask myself “what possibly can happen next?” Do you find yourself experiencing that same twist?

Having always been a strong advocate in the ability of factual information to defeat the perceived demons that can develop in the middle of the night, I have sought out some truth to all this noise in the media. Friday a week ago, I attended a data summary presentation by Edsel Charles of Market Graphics Research Group, one of the foremost housing industry economists in the central US. His company researches and monitors the housing industry a 21 state region in the heartland of the country, ranging from Michigan to Florida. Their data is highly sought after by hundreds of builders, real estate companies, and lenders within this region, to help them in the decision making process – everyone, after all, is continually seeking the crystal ball.

As with all prognostications, there is an inevitable wild card that crops up (can you say “wall street financial crisis?”) but historical, Mr. Charles and his group have been far and away more accurate than anyone else out there. The key to that is the fact that they actually get out into the field to see, with their own eyes, what is going on in the development, building and sales side of our industry. When Market Graphics tells you there are “x” number of lots in the pipeline or “x” number of new homes finished and unoccupied, you can take it to the bank because they have visually verified every piece of the reported data. This is not to run an ad for Market Graphics but to relate some interesting facts that Mr. Charles presented at the data summary event I attended.

To the average person, there seems to be a lot of building continuing on in the 11 county Greater Nashville area. I hear it all the time, buyers telling me they want the deal of the century because the builders are too stupid to quite building, and when you have too much of something, each one is worth much less than before. Blah, blah, blah. That’s true up to a certain point, but only to a certain point. And just because your cousin Eddie said it, doesn’t make it true. The facts are that building activity for this year (as measured by new permits issued Jan-August) is down 45% from last year and is down a whopping 52% from the same time in 2006 at the height of the building boom.

The research graphs released show that new home starts in the same 11 county area is dropping like a rock after hitting a peak of over 17,000 in February 2007, yet the 30 year mortgage rates have held fairly consistent around the 6% line. Twice since September 2006, those rates have varied about ½% but for the most part the variance was about a quarter of a point right around the 6% mark. During that same time period, employment in Greater Nashville experienced a pretty large increase from 2005-2007 and has held fairly steady since then.

So what does all that mean?? Let’s go back to our high school civics class (or was it economics class or just plain math class? I can’t remember) where you learned about such a thing as supply versus demand. There were plenty of different ways to teach the concept but basically it revolves around the fact that the more of something there is available in the market, the less each one is worth. The inverse is true too. The fewer products available, the more each one is worth. Increased supply means lower demand (and falling prices), and lower supply means increased demand (and rising prices). Simple economics. Coming back to you?

Well, that’s exactly what happened to us from 2005 through 2007 – low supply, which drove up prices. Builders and sellers responded to the demand, and started pumping out the product like crazy. Then what happened? Oversupply - we simply had too many houses available, the market got saturated, and prices began to fall. Great, you say. But why has the price of my house fallen this year, when it’s not a new house? Simple answer, oversupply is oversupply. Regardless of new or existing, when there is too much product on the market, prices on ALL available product begins to fall. Now, with the credit crisis, the whole thing has taken on a life of its’ own. But that’s a different story I won’t go into right now.

So what’s the bottom line? Well, taking all these economic forces into consideration, and getting back to the news I received from the data presentation, I have to say overall it was actually good news. The data reveals that in the Greater Nashville 11 county area, we have fallen as far as we are going to. In fact all the data points to the fact that we have already hit bottom and are headed back up with the evidence pointing toward our recovery being completed by the fall of 2009.

Yeah, I know that’s a full 12 months from now. But at least we won’t still be in a free fall for the next 12 months, like what have experienced for the past 12 months.

Oh, but wait! Now there’s a credit market freeze. Yikes! All I can say is…thank God we live in Tennessee!

7 Simple Steps To Happiness And Success!

Are you feeling stuck on the roadmap of life? Have you longed for greater success and happiness, but haven’t yet hooked the brass ring?

Albert Schweitzer once wrote, “Success is not the key to happiness. Happiness is the key to success. If you love what you are doing, you will be successful.” Here are seven steps you can take today to achieve more happiness and success in your life:

1. Believe In Yourself. Identify your natural talents and abilities. Do what you enjoy and what you do best. Truly successful and happy people find joy in their working lives. Invest your time in what you do best. Focus on your strengths and not your weaknesses.

2. Develop a Vision. First, define your path and start working your plan. Write down a vision for yourself and your life. Be specific. What do you want to accomplish? What do you want your life to look like in 5 years, 10 years?

3. Develop Good Habits. Happy and successful people choose good habits. If you’re watching too much TV, chronically late, or eating poorly, make a commitment to change your bad habits into habits consistent with your goals.

4. Show Gratitude. The happiest people are also the most grateful people. Count your blessings frequently and you’ll quickly start seeing a change in yourself and the world around you.

5. Take A Chance. Seize opportunities! Success and happiness does not come to those who sit and wait for it to be brought to them.

6. Give to Others. Studies reveal that the happiest people are also the most generous. Do, say, or give something nice to another and see how your own life improves.

7. Take Responsibility. You hold the key to your future. Take responsibility for your actions. Choose the work you like to do, and do it well. Ultimately, you are the master of your fate. You choose your own future by the decisions you make and the actions you take.

I almost fell out in the floor laughing when I came across this...
Happy Halloween!