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24 Jan

This Way to the Real Estate Market

Posted January 24th, 2007 | View Comments

There’s been a lot of ink spilled lately over the real estate market. Some of it has been real ink, such as the many articles that have appeared in the Sacramento Bee over the last eighteen months while prices have been coming down and sales have been dropping. A lot of it has been metaphorical ink — really bits living on a hard drive somewhere — and I’ve been responsible for much of that in the Sacramento area, as have many other blogs with more or less differing takes on it and different readerships. SacramentoLanding comes to mind.

What’s really interesting to me as a professional in this business is to watch how “the market” and the individual transactions in it interact. On the one hand, there is no “real estate market”, at least not in the same sense as there is a grocery market where you can walk in and chat with the grocer. When we talk about “the market”, we’re not talking about a place where you go to buy things, we’re talking about a collection of data about individual real estate transactions. The real estate market is a set of numbers, a bunch of statistics that some boring bean counter (often me!) sees fit to format in the form of some sort of article, or heaven forbid, some sort of TV show.

I hope it doesn’t make it to TV. I honestly do. I prefer The Daily Show.

So these individual transactions that you can sum up and pop into a spreadsheet aren’t any kind of place, they’re “just an idea”, one might say. (You know, like marriage. Or money. Or religion. “Just an idea”. Nothing to get excited about. Move along, folks…). Yet it’s interesting to see how the idea is both made up of individual sales and feeds back on itself. When buyers and sellers think the market is going up, that’s how they tend to behave. Buyers are more apt to yield to price pressures from sellers, and sellers love the idea of looking at comparable sales (“the comps”), and tacking $25,000 to $50,000 onto the price for their homes special and unique features — often something pretty stunning like storage under the stairs or stainless steel finish nails.

No wonder buyers like me best. Perhaps that was a little glib.

When the market’s going up, sellers wake to the heady smelling salt of money in the air, and are delighted to hop on board and raise prices. And when it’s going down, buyers look at recent price reductions. Sometimes they’ll pick out a home that’s priced below market value and cry, “what have you done for me lately?”, knocking another $25,000 to $50,000 off the price.

Actually I’ve never had a buyer really say “What have you done for me lately?” out loud. That was a dramatic embellishment. I just wanted to show the sellers who might be reading this that I am, horror of horrors, fair and balanced.

So the market’s not a place, it’s just an idea, and it’s not happening now, it happened in the past insofar as some data got published, and it happens in the future insofar as buyers and sellers are always wanting tomorrow’s price today. Well, more to the point in this market, I suppose, sellers are wishing for yesterday’s price. Colleagues, have you heard, “But I had it appraised six months ago for $ xyz bazillion dollars”. Meantime buyers are picking out their homes and trying to apply the price as it will be six months from now.

Think of it as a Star Trek episode (circa “Next Generation”). You have these two entities — humans, let’s say — and someone has sprinkled them with chroniton particles (yes, I do watch the show), so they’re out of “temporal phase”. The sellers are living in 2004, let’s say, and the buyers are tooling around somewhere in February of 2008. Meantime here comes old Johnnie Lockwood on January 24th, 2007 (for example). I try to remove enough of these chronitons to get these people into phase and meet somewhere near the present day. If I can do that, I can get paid. So I do my Realtor® magic, which sometimes works, and sometimes fails.

Sorry, I can’t go into technical details as to how I work this, but basically it involves using the ship’s deflector dish and a neutrino beam.

No, I’m just kidding. Actually it’s nothing so glamorous. I’m really more like Lieutenant Uhura, chatting with my Klingon counterpart, Lieutenant Gorp (for example). So I write up some paperwork and transmit it to Lieutenant Gorp, telling him that Captain Kirk is prequalified for $480,000 and that’s what he’s offering. Then Lieutenant Gorp sends back that his Captain will take nothing less than $522,350. And I’m thinking to myself, “Dang, don’t these Klingons know how to use round numbers?”

Well, anyway, you get the general idea.

1-2-3-4 !
Sha-la-la-la-la-la, live for today
Sha-la-la-la-la-la, live for today
And don’t worry ’bout tomorrow, hey, hey, hey
Sha-la-la-la-la-la, live for today

  • Mark

    Sorry John, I didn’t realize that the conversation regarding the real estate market was closed over here. I realize you’ve had to eat some crow over the last year and I understand the reason you are closing this forum. It’s been very interesting to get a peek at the way you do business now that this is a commercial blog (it was, at least partially a personal blog before, wasn’t it?). I think people should buy a house at anytime (from you even) so long as they can afford the full mortgage payment, so please do not say that I think homeowners are dupes. But with current rents low, if a new buyer has nothing in the bank now I see only trouble when they are paying much more.
    Unfortunately, over here buyers are being promised conservative (4%) appreciation over the next 5 years on homes currently priced at 250k. But they are adults, and hopefully somebody close to them is informed enough to caution them since you, their trusted Realtor, will not.
    Good Luck John,
    Mark

  • Mark

    Oh, and I really don’t expect you to remember this from past conversations but.. I live in San Francisco where you have to be a corporation or a CEO to buy Real Estate so putting me down as a lifelong renter isn’t quite as apt as somebody waiting it out is Sacramento.

  • http://www.sacramento-home.com/real-estate-agents/ John Lockwood

    The conversation regarding the real estate market isn’t closed, but your assumption that I’ll gladly let you come here and give out real estate advice to my potential customers is not, especially when you’re talking through your hat without any real knowledge of their situation.

    I caution people against overextending themselves all the time. If readers want to follow links to SacBee and Sacramento Landing they can do so — I even provide links to both on my blog roll, because I think both sources are valuable resources, and Lander is a good friend. You can even come here and tell them to go there, that’s fine. What you have done over and over again that is reprehensible enough to get you bounced if you keep it up is to question my motives and integrity. You’ve done it as recently as two comments ago, “hopefully somebody close to them is informed enough to caution them since you, their trusted Realtor®, will not.”

    That was fine as long as you did it to me. Now you’re doing it to my business associates. You assumed the buyer isn’t qualified, and you assumed that in the process of getting her qualified we would act in an underhanded way. If you want to spew your antiprofessional venom somewhere, Sacramento Landing is an ideal forum for it. You can quote this and go to town about what a self-interested mercenary I am if you like.

    This blog has never been personal. It’s been a commercial blog since day one. It’s purpose is to sell real estate. If you can’t afford to do that because San Francisco is unaffordable, I sympathize, but I didn’t pick where you lived. If you want to discuss the market, go nuts. I welcome your input and data if you have any. I discuss the market all the time, and when it’s down, slow, depreciating, what have you, I say so, not only here but to my buyers in person. Might Jen have made a mistake about prices in her post, or been optimistic about appreciation in the absence of any knowledge of the future (just as you bubblers are optimistic about depreciation based on the same ignorance)? Sure, we all make mistakes.

    However, I’ve made the mistake of leaving up your challenge to my ethics for the last time by keeping the comments above up. I’m doing it this last time because I want you to feel like you got it off your chest. Next time you try that tack, however, do it somewhere where Realtor®-bashing is considered de rigueur. I don’t come to your job and interfere with it or question the integrity with which you do it, and you’re not going to do that here with me, and you’re especially not going to do it here with Jen or any of the other guests that I may choose to invite.

  • Mark

    John, I’m sorry. I did see your Blog (in the past) as your personal blog. Because only a few of the entries I recall reading had to do with marketing as far as I recall. So I felt free to post here and, as you see it, Realtor bash as you have felt free to post on Landing and bubblehead bash. But this is your job, so, you got me there.
    I love living in San Francisco, it is certainly a choice to live here and I am happiest here so it’s the right choice for me. I in no way feel like you have done anything to make me live here. Plus, we have rent control so that’s pretty sweet.
    It may be fuzzy logic but if somebody is a first time home buyer I must assume they are renters (or living somewhere for free) since they do not own a house. Then looking at local rents vs. a mortgage on $250k (and personally, in that price range I’d be looking at condos), they can rent a nice house for $1,600.00. So they will need to pay $400.00 more a month on a condo for the interest only payment/HOA. So this is the leap I’ve made, if they are paying as much as $1,600.00 a month in rent and they cannot save $3,000 I really do fear for them when the mortgage goes up. So I posted my concern. Perhaps a person in this situation does have the income but just spends it all.

  • Mark

    Crap, I always forget something…
    p.s. I will not post on here anymore.

  • http://www.sacramento-home.com/real-estate-agents/ John Lockwood

    Mind the door.

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