Surprisingly Gloomy Headlines Betray the Real Story
I’ve always heard that negative news stories, whether on TV or in the paper, always sell better than the happy go lucky story. That trend seems to be true recently as I have noticed nothing but negative news stories on the state of the real estate industry.
I have two theories as to why this is happening right now…
1. The news is talking to the wrong people.
2. Everyone is looking in the wrong direction to figure out where the market is heading.
As for talking to the wrong people, I believe it is fairly simple. Right now, investors are leading the real estate industry and allowing for, at least, some semblance of stability to exist in various markets around the country. Unfortunately, there are not enough investors connected with the media to get recognition and coverage. Instead, when the media need a story and want to print a current outlook on the real estate industry, they turn to local real estate agent associations and unless they happen upon the right agent, the doom and gloom begins to pour out.
Whether it is a down assessment on jobs, a dim outlook on future building or a slow forecast for sales, all of the news I am seeing lately points to a lousy real estate market and no real outlook for recovery anytime soon. As always, real estate is a hyper-local market business and many reading this post may be in markets where the news is fantastic and the real estate market is already in recovery mode or never really lost steam only value. If that is the case, you may not understand what many of us are seeing from media coverage. As an example, just last week there was a local story that highlighted the dismal state of the real estate industry. Two people interviewed who have credibility in the industry lamented that real estate agents are feeling the pain of a lack of sales, low price points and few retail buyers while the local builders association meetings have digressed to the point of announcing births and weddings to highlight good news.
Meanwhile, real estate investors made up nearly 30% (I believe the actual number to be higher) of the sales in 2010 and accounted for millions of dollars in acquisition and repair to neighborhoods across the same city. Those who have been trained under a strict real estate agent background, may not have the expertise and insight to actually see the unbelievable potential and opportunity that this current real estate market presents. While price points may be down, foreclosure notices may be up and there may be fewer retail sales, that does not mean the real estate industry is weak. Many cities are seeing an influx of real estate investors who are looking for quality investment properties and are often purchasing multiple properties. The opportunity to develop a different type of buyer exists, but it requires a different way of approaching potential clients.
As far as looking in the wrong direction is concerned, all of the numbers being reported today by real estate professionals to the media are comparing past price points, past values and past trends to the reality on the ground today. Unfortunately, many parts of the country will not see past numbers again for some time if ever. Instead of looking to the past, the story that needs to be told is the future.
Most quality real estate investors will tell you that they do not look at past performance to give them any real insight into an investment property. What a property may have sold for in the past is much less relevant than the factors that will help it sell in the future. The real estate market is so different today that past analytics simply do not paint a picture that is relevant. When real estate professionals discuss the poor real estate market when compared to the past, they are failing to acknowledge this fact. What is absolutely relevant is what is taking place today and what is going to take place in the future. What is happening to the growth of the city? What is happening in the job production market? Is the particular areas GDP growing or shrinking? Is the political establishment working to entice job and city growth or are they stifling growth? These are questions that are much more relevant to rental rates and home values than what was happening during the heyday of real estate irresponsibility.
With a little effort on our part as real estate investors, hopefully we can turn the headlines around and point out to the news media that there is indeed a group of real estate professionals who are not only succeeding and thriving in this market, but are also growing. Meanwhile, we’ll save the birth announcements and wedding save the dates for the doom and gloom side of the business.
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