There’s always something to howl about.

Show Me the Numbers!

There is no question that I am one of the more dour of the Bloodhound gang; if we were the “seven dwarfs” I’m laying decent odds that I get tagged with the “Grumpy” moniker.  And while I may, on occasion, revel in astonishment at the self-inflicted pain that the industry has kindly laid at our feet via the past 5 years of transgressions; I am in no way a fan of the current havoc buffeting our industry.  I don’t like seeing people losing their jobs, their homes, their future plans – it’s not a pretty sight.  But one thing I do like, is honest, important inspection of real estate and mortgage; and Greg Swann’s recent post on “You’ll Lose Money if You Buy a House?  Which House?” reminded me of why I blog and what I believe we should all strive to achieve in one form or another through our blogging: cutting through the sound bites to get to the truth.
I believe that cavalier shibboleths are the primary cause of Realtor-focused ire on behalf of the disgruntled public.  We’ve heard for too long that “Now is a great time to buy,” “Rates are dropping,” “It’s a buyer’s market,” and more that unfortunately to the everyday Joe just ring of hollow greed on the part of the real estate professional.   And why do they ring of greed?  It’s in the numbers stupid!  It rings of greed because the main stream media is showing them graphs and charts and year-over-year figures that show real estate, as a whole, is a losing investment right now.  They’re saturated with it.  6 months ago ask someone what the Case-Shiller Home Price Index was and you’d probably get a blank stare; ask today and you’ll probably hear about what the index is doing for that person’s MSA.  This data dump has created a problem for real estate professionals.

The consumer is being fed numbers by the media on one hand and weak aphorisms by the RE machine on the other.  The numbers, regardless of their flaws will win; because numbers have authority and sayings do not.  In times of uncertainty people need something to hold on to, and a graph and a % sign are far easier to justify than a catchy slogan.

So what does this have to do with Greg Swann’s post?  Well Greg articulately debunks Cramer by showing how the right property in the right neighborhood with the right potential upside return can still be a winner even in the overall loser that is currently West Coast real estate. How’d Greg do it?  With the numbers stupid!  Cramer talks in sound bites and generalities; Greg talks specifics to show how the general statement is flawed. From his post:

Don’t buy a home? Which home? A few weeks ago I was in a trashed house that was listed at $200,000 below market. We estimated that it need $50,000 to bring it back to turn-key condition, with a four-month span of time between purchase and resale. Even allowing for errors in our estimates, the house would net out to between 200% and 300% cash-on-cash return in one third of a year. Do that three times and $50,000 capital becomes as much as half-a-million dollars in a year’s time.

While these homes might be few and far between in the glut of the US housing market, they are out there; and they can only be found by navigating the market with an experienced RE sherpa. You just need someone to show how even with a declining sales market, there is room for positive return with the proper approach to purchasing the asset.  Knowing things like the below market value, the carrying cost of holding the property, the rehabbing costs, and then the sales costs will help home buyers make informed decisions when purchasing that above home.  Something they can’t get anywhere except from an experienced adviser.  It’s cases like this property that crystallize the Realtor value proposition.

This is not rocket science, and it’s being done every day by the smart folks in our industry. My challenge to us all is to stop spouting shibboleths and to start using numbers to accomplish two things: 1. provide value to clients and 2. to show our expertise in the markets we service to those that may stumble across our online missives.  Platitudes, truisms, and the like will not win business in a tough market; shrewd analysis of local markets on display will.  We owe it to ourselves and our customers.  For the people who are brave enough to enter the war zone that is the US housing market are surely doing so for a reason and with a keen eye; and are looking for good people who can navigate them through the mine field.