“The next 180 days may be the toughest economic days we will ever experience in our lifetime.”
This was spoken by Gary Keller at the recent Keller Williams Family Reunion I attend in Orlando.I admire someone of Gary’s stature who pulls no punches. Not many leaders are willing to do that, including our own trade organization.
There was palatable silence in the room of over 6000 Realtors.
What has happened?
Historically, our housing market has increased by an average of 4% per year, until…. 2000 to 2005 where homes appreciated 7 to 13%. Those were the good old days where it took no skill to sell a home. But, it was not sustainable as we are finding out. Note the graph is for the last 20 years.
Had home prices continued to grow by the average 4% we would be around $198,044. Which is approximately where we are now. I don’t know about your area, but in Ann Arbor first time homebuyers were shut out of the market. They could not afford to live in the city.
The Silver Lining
According to NAR, first time home buyers made up 41% of the market share in 2008. The market is correcting itself and letting the first time home buyers back in.
Our economy is cyclical. Did we think we would be exempt from ever having a correction? Well truth be told I never really studied the market. What is happening today has happened before. That is why it is called a cycle. See below why we HAD to correct? Peoples incomes were not keeping up with the housing appreciation.
So what do we do?
1) Cut expenses to bare bones.
2) Work harder than we ever have.
3) Make you first priority Lead Generation and do NOTHING else until that is done.
4) Be willing to do whatever it takes, Shift your strategy.
Are we in a C.R.I.S.I.S? You betcha.
Charts from the Power Point at KW Family Reunion, Photo by Missy Caulk
March 2, 2009 at 7:52 pm
Missy – As someone who owned a home in CA between 2001 and 2004, I saw how the run up was affecting everyone. A home in my neighborhood, a quiet suburban neighborhood – perfect for a good starter home for a young couple, nothing fancy – this home went for $1.2 million. It was mind numbing. It was a tiny house, built in the 1940s and hadn’t been upgraded in awhile. It just didn’t make sense. It was out of control. I sold our house after three years and wound up with a 30% appreciation on our original purchase. We didn’t upgrade anything or do anything extra except cut down a really ugly bush and plant a few flowers. It was bound to happen eventually (as cycles have predicted over and over again).
Your advice is so very true and I’ll be thinking about it each day. Thanks Missy!
March 2, 2009 at 10:42 pm
Matt, I had dinner with a co-worker one night, she had just moved here from CA. She told me she stood at her fax machine as pages and pages of offers on her home coming in.
I would not have believed it if I had not heard it with my own ears.
She was able to buy in one of the top neighborhoods in A2 where most professors live.
I think she was 25 years old.
Glad you liked this it really helped me see the numbers and I could have a better idea of what we were going through.