HOW ARE ECONOMIC STATISTICS REPORTED? I BELIEVE THERE IS A NEW ECONOMIC PARADIGM.

By
Real Estate Agent with Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate 303829;0225082372

                                        * * * * HARD CORE REAL ESTATE TALK * * * *

I seem to recall reading somewhere about 3 months ago that the administration was forecasting growth in of the U.S. economy of 4%.  Since that time, I've read the same predictions from several "authoritive sources".  Whenever I see such a prediction, I can merely say to myself. .  how???

BE PREPARED!  I also believe that a lot of folks simply believe that if we expect good things to happen, good things will happen.   I believe that we real estate practitioners need to look at facts and figures and not rely on "feelings".  The Boy Scouts are the authorities here with "BE PREPARED".   In many ways, survival in the real estate business today is like wilderness survival.  If real estate practitioners are prepared, we will survive this market catastrophe in far better shape than if we simply stand by and wish for the best. 

Michael Mussa, senior fellow at PIIE and former chief economist at the International Monetary Fund (IMF), predicts that real GDP growth in the world will be 4.2 percent in 2010 over 2009, and real GDP growth in the United States will be 4.0 percent from the middle of 2009 through the end of next year. . . MORE. . .

These folks remind me of the real estate prognosticators who continue to claim that the real estate market has "bottomed". 

Not everyone agrees.  The Congressional Budget Office, staffed by a cabal of truth seekers and radicals who continue to confound the President of the United States with facts and figures, projects a gloomy 2010.

Elizabeth Warren, Chair of the Congressional Oversight Panel, a prognostigator I greatly admire for her candor and reliance on facts and figures, stated in February 2009:  What effect is this recession having on the middle class?   "America's middle class is at a turning point. The outcome of this recession will either be a significantly strengthened middle class--which has less debt and a stronger safety net, both on its own and through new government regulation--or the middle class we once knew will disappear. [In that case,] America will move to a two-class economy--a substantial upper class that's financially secure and then a very large underclass that lives paycheck to paycheck." . . . MORE. . .

ON FORECLOSURES, Dr. Warren has zeroed in on what I believe to be the most pernicious and generally overlooked cause of the economic decline and the likely failure of the economy to recover at the rate predicted by Congress, the White House and the NAR.  Negative equity, home owners who owe more for their homes than the market value of that property has made about 20,000,000 home owners prisoners of their home mortgage and effectively removed many from the consumer market.  How can the economy grow when the consumer pool is shrinking??

"Mortgage foreclosures pose a special problem. Millions of people could make market-rate payments on 30-year fixed mortgages for 100% of the current market value of their homes. But these can-pay families are driven into foreclosure because they cannot pay according to the terms of the higher-priced mortgages they now hold, and refinancing options are limited or nonexistent.". . . .  MORE. . . .

HAS THE REAL ESTATE MARKET BOTTOMED?  That depends on where you are located and what highs the prognosticator is using to come to the conclusion that the real estate market has "bottomed". 

WHAT IS THE NEW PARADIGM?  The real estate market has a BASE of about 80% of the numbers reported.  What does that mean?

It means that:

  • the actual home buying pool is about 80% of what we think it is.
  • only about 80% of home owners are in a position to buy or sell.
  • only about 80% of home owners have sufficient equity to be able to sell with net proceeds.
  • only about 80% of the home owners who wish to MOVE UP are able to do so.
  • only about 20% of the homes purchased during 2004-2007 have positive equity.Head in Sand

It also means that agents and brokers who plan to survive the next several years in the real estate business will need about 20% more cash to fund overhead because the ROI could be about 20% less than in the past.

It also means that the market can only sustain about 80% of the real estate licensees who wish to make a living in real estate sales.

If you plan to survive as a real estate practitioner, don't put your head in the sand and hope for the best. 

Positive thoughts don't make things happen.  Hard work, planning and execution is what makes things happen. 

THE NEW PARADIGM requires that real estate practitioners know the market, focus on niches that have a chance of success.  If a real estate agent focuses on listing homes for sellers who desire to "move up", be careful and make sure that they have sufficient equity to finance their plans.

THE NEW PARADIGM requires that listing agents who propose to list and sell homes for relocating home owners understand that the subject property has a far lower market value than the owner believes (or "feels").  Listing agents must be tough with unrealistic sellers who believe that they should be able to sell for more than the market will pay or that appraisers will value.

THE NEW PARADIGM requires that many prospective buyer contacts are from opportunistic consumers who believe the advertising and industry rhetoric that claims real estate is easy to by without consideration of credit, cash or investment.

THE NEW PARADIGM requires that agents stay on top of changes in their market area, plan their work schedule, continue training to know the changes in the law and real estate practices, i.e. foreclosures / short sales / appraisals and more.

THE NEW PARADIGM requires that we know our business and run our business in a business like manner.

Courtesy, Lenn Harley, Broker, Homefinders.com.

See also:  http://www.upi.com/Real-Estate/2009/09/17/Home-Prices-Will-Fall-Five-More-Years/2401253221172/

Posted by


_______________________________________________________________________________________________________


Want to learn more about Loudoun County, VA? Join Loudoun County, VA on Facebook!

close

Re-Blogged 4 times:

Re-Blogged By Re-Blogged At
  1. Janice Roosevelt 09/23/2009 07:29 AM
  2. Don Rogers 09/23/2009 07:36 AM
  3. Tim Ludemann 09/23/2009 09:22 AM
  4. Sandy Childs 09/24/2009 10:29 AM
Topic:
Real Estate Sales and Marketing
Groups:
AR Twitter Users
Real Estate Trends
Club Chaos
Realtors®
Tags:
real estate market

Spam prevention
Show All Comments
Rainmaker
558,669
Chris Olsen
Olsen Ziegler Realty - Cleveland, OH
Broker Owner Cleveland Ohio Real Estate

Hi Lenn -- I had to turn down 3 sellers this past month because of negative equity and they don't want to short sale.  I'm sure it's happening everywhere.  They mortgaged themselves to the hilt a few years ago when credit was cheap and easy.

Sep 23, 2009 09:59 PM #70
Ambassador
883,619
Lane Bailey
Century 21 Results Realty - Suwanee, GA
Realtor & Car Guy

Are you sure that the 80/20 rule means that we need 80% of the current agents?  I'd flip that... we only need to best 20%. 

And while I see a bottom in the market, unmistakably, I also feel that I am about to see another plunge beginning in about 60 days...  And extending or expanding the FTHB Tax Credit won't change that.  It will only change when the market is ready to change... when people aren't freaked out about their jobs and when they feel that it is safe to buy again.  I am begining to think that will be in four years...

Sep 23, 2009 10:04 PM #71
Rainmaker
729,680
Chuck Carstensen
RE/MAX Results - Elk River, MN
Minnesota Real Estate Expert

Very solid content.  The only point I want to challenge everyone on is that an "uplifted state of mind" makes a huge difference.  Being positive is part of that.  When someone understands that state of mind it does attract your desires to you. No matter what the economy is a person in an "uplifted state of mind" will prosper.

Sep 23, 2009 10:22 PM #72
Rainmaker
978,242
Sharon Alters
Coldwell Banker Vanguard Realty - Fleming Island, FL
Your Fleming Island Relocation Agents.

Lenn, I love this post and the 75 comments it has generated. There is so much spin on any statistics depending on the point of view of the stat giver, that it is more helpful to look at raw data. A mortgage broker friend of mine always looked at durable goods to determine where the economy was heading. I agree with Chuck that a positive state of mind is very important.

Speaking of stats, let's look at the number of real estate agents. How inaccurate a stat is that? How many are there in every state that hold onto their license because they don't want to lose it but do $0 dollars business. How about the ones who do an occasional referral? How about the ones who do one to four deals a year? So on the surface, it looks like we have a lot of agents, but do you even think 20% are really doing much business?

Sep 23, 2009 10:50 PM #73
Rainmaker
589,762
Jim Hale
ACTIONAGENTS.NET - Eugene, OR
On the Move for You! - Eugene - Springfield Oregon Real Estate

The straw that broke the camel's back was the housing bubble bursting. 

The reason there was a housing bubble was governmental policy seeking to put marginal buyers into homes (fostered by both parties in the Congress, two Presidents, the FED... and the NAR) - combined with lender dishonesty from the bottom to the top of AIG.

But the problem was not just the straw.

The problem was the load the camel was already carrying:  too much public debt (at all levels of government, but especially at the federal level), too much private debt, a negative (until recently) private savings rate, too little willingness on the part of American workers to work in industrial jobs at world-wide wage scales, too little progress on making our schools a place where young people REALLY prepare for this century (instead of the last) AND too little appreciation for our precarious energy supply - coming as it does, in major part, from nations in a basically unfriendly part of the planet.

(The private debt part of this was exemplified by the use of homes as ATM's.)

Until we fix all these things, the middle class (and a "normal" real estate market) are in great jeopardy.

Not to mention the future of the Republic.

The current administration appears to have no clue.  But they are not alone.

Sep 24, 2009 05:54 AM #74
Rainer
156,739
Sandy Childs
Keller Williams Realty - Spartanburg, SC
Realtor - Spartanburg, SC

Lenn: Two of the most powerful points that you make are: Planning and running your business, so many real estate agents don't have any sort of plan. Second is to be on top of the market and watch for those changes, we have started telling sellers that their price can and just might change while the house is on the market.

And of course, what will those powers that be do?

Sep 24, 2009 10:28 AM #75
Ambassador
2,402,336
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Sandy.  Being on top of the market is my hobby.  I do plan but I also work very hard.  Work comes first during work hours. 

Jim. You're right about the effects of home owners spending their equity.

Frank and Sharon.  HA!  The cost of NAR national/state and local is far too high for folks who don't sell.  They can keep their license but that NAR membership is steep.

Lane.  I don't have a crystal ball but I don't believe we'll be out of this thing for many years.  We have to almost start from scratch.  Our consumer pool is far smaller than it was 5 years ago.

Chuck.  Frame of mind doesn't sell real estate but it doesn't hurt either.

 

Sep 24, 2009 02:00 PM #76
Ambassador
2,402,336
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Chris.  Folks who spend their equity have nothing to complain about. 

France and Mark.  Of course.  I merely write what I write to keep folks aware to not expect things to stay the way they were.  Those days are gone.

Lorrena.  I surely don't want a society with very rich and very poor.  That's a recipe for stagnation.

 

Sep 24, 2009 02:03 PM #77
Ambassador
2,402,336
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Esko.  Dr. Warren knows here business.  She's dealing with facts and trends and can analyze them very well.  She's published warnings about the economy right along. 

Jane.  It isn't necessary for everyone licensed to be running a successful business.  It's only necessary that those of us that are serious business people not be choked off by government action.

Sep 24, 2009 02:07 PM #78
Rainmaker
1,293,738
Carla Muss-Jacobs, Principal Broker/Owner
BuyersAgentPortland.com | (503) 810-7192 Portland Metro Exclusive Buyers Agent | 100% Buyer Representation ~ 100% o... - Portland, OR
Buyer Focused ~ Buyer Results

Woo hoo . . . a two'fer Thursday.  A great read . . . AND I reported a "concern" over Jimmy Choo Bags, the idiot!

I'm amazed that the news media is saying "Oh, the recission, it's over now."  (Let's all break out the bubbling and chant "Happy Days are Here Again!")

What do they think the economy is?  A water faucet with on / off switches??

Sep 24, 2009 02:51 PM #79
Ambassador
1,264,941
Erica Ramus
Erica Ramus - Ramus Realty Group - Pottsville, PA - Pottsville, PA
MRE, Schuylkill County PA Real Estate

Lenn-- A large percentage of the population in my area already lives paycheck to paycheck. They are one illness or laid off spouse away from disaster.

Sep 24, 2009 03:02 PM #80
Ambassador
2,402,336
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Carla.  Yes, our spammers are back. I'm just going to ignore them. 

The media is delivering the administration's message.  I don't buy it.

Erica.  That's the way it is across the country. 

Sep 24, 2009 03:29 PM #81
Anonymous
Anonymous
Anonymous

The problem with statistics is that they are created by economists or politicians or someone else with an agenda. As an economist myself, I can state with certainty that a good -- or even average -- economist can come up with statistics to support whichever position is desired.  Most economists have two hands, so they can say "on the one hand, . . , but on the other hand."  (A little humor there)

That four percent number we keep hearing about is highly suspect. Without knowing what exactly went into it, and over what time period, it has little meaning.  But that is not to say that it is not as good a guess as any other prediction.  Fortunately, the only predictions that anyone remembers are the ones that come true, and they are remembered mostly because the predictor keeps reminding usof his/her accuracy. The bad predictions are quickly buried and hopefully forgotton.

Akron, Ohio 

Sep 24, 2009 03:46 PM #82
Rainer
189,984
Thomas McCombs
Century 21 HomeStar - Akron, OH

The problem with statistics is that they are created by economists or politicians or someone else with an agenda. As an economist myself, I can state with certainty that a good -- or even average -- economist can come up with statistics to support whichever position is desired. Most economists have two hands, so they can say "on the one hand, . . , but on the other hand." (A little humor there) That four percent number we keep hearing about is highly suspect. Without knowing what exactly went into it, and over what time period, it has little meaning. But that is not to say that it is not as good a guess as any other prediction. Fortunately, the only predictions that anyone remembers are the ones that come true, and they are remembered mostly because the predictor keeps reminding usof his/her accuracy. The bad predictions are quickly buried and hopefully forgotton. Akron, Ohio

(Sorry if this is a repeated post. I couldn't tell if it went thru OK.)

Sep 24, 2009 03:56 PM #83
Rainmaker
196,393
Emily Lowe
The Lipman Group Sotheby's International Realty - Nashville, TN
Nashville TN Realtor

Lenn - I agree with you - I think that a positive attitude helps, but it has to be combined with hard work and a PLAN!!  And let's add to that integrity and ethics - although realistically, there will always be those who choose to be shady.  I think this industry needs a good cleansing...

I also think that wherever the bottom is, we will be there for a long time and the climb back up will be slow and gradual. 

Always like reading what you have to say!

Sep 24, 2009 07:53 PM #84
Ambassador
883,619
Lane Bailey
Century 21 Results Realty - Suwanee, GA
Realtor & Car Guy

There is something else interesting here... 

This recession is tagged as having started in December, 2007, yet the econcomy continued to grow in GDP until the 2nd Quarter of 2008... and the decline began in Q4. 

Now they are claiming it is over, yet we haven't had growth in the GDP since 2008 Q2. 

source...

Sep 25, 2009 10:46 PM #85
Ambassador
2,402,336
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Lane. There is recessiion and there is housing recession.

I deal with housing, not the economy which I leave to our "leaders".  So, what the leaders are saying is:  "The recession began in 2007."  Now they are saying: "The recession has ended".

So, I look to the guidelines wherein:  Technically, 2 quarters of economic negative growth is deemed to be "recession".  We did reach that sometime in 2008.  When the government "stated" that the recession began in 2007, it was a "statement" with no supporting data. 

Now they are "stating" that the recession is over.  All I want to know is, where is the supporting data?

If the government is no longer relying on technical data, let us know that they now rely on opinion.  Or, perhaps they prefer to rely on that age old "feeling" definition.

 

 

Sep 26, 2009 04:13 AM #86
Ambassador
2,402,336
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Emily.  Always glad to have you drop by and comment.  I agree that this "bottom" will be here for a long time. 

Sep 26, 2009 04:16 AM #87
Ambassador
883,619
Lane Bailey
Century 21 Results Realty - Suwanee, GA
Realtor & Car Guy

The sad part is that the media is running with it.  There used to be a time when the media acted as a check on the power of government... now they are accomplices. 

Sep 26, 2009 11:02 PM #88
Ambassador
2,402,336
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Lane. So true and so sad. The have no sense of responsible journalism.  Merely headlines and opinion.

 

Sep 27, 2009 07:00 AM #89
Show All Comments
Ambassador
2,402,336

Lenn Harley

Real Estate Broker - Virginia & Maryland
Ask me a question
*
*
*
Spam prevention

Additional Information