Here’s another guest post by Mike Farmer from http://bonzai.squarespace.com/. Mike is a Realtor in Savannah Georgia and he gave me permission to copy a different article that he wrote, so I’m going to copy this one as well (with implicit permission - I hope that’s okay Mike). I think it speaks very eloquently about the situation that we’re in and the questions a lot of people are asking:
What’s going to happen?
Are we all going to die? (click on that question for more insight into it…..)
So, read what Mike has to say and let’s talk about it. As the next few weeks and months go on, I’ll share more of my thoughts about what the new reality is like and what’s going to happen from here:
Testing the mettle of real estate professionals or what now, Slick Rick?
Americans can’t take bad news for too long — we begin to rebel against it, in our on way. We hardly ever take to the streets, moods merely change and a collective determination sets in. We can be a moody country, falling into periodic blue periods where a cloud of gloom affects our outlook — but it’s not in us to be gloomy for too long. In us also, at times, is a frenzied optimism, whether it’s certain technologies, cult personalities, sports, political, homes/investments or virtual optimism over the internet. Our fortunes tend to change with our moods, and sometimes it’s hard to tell which comes first.
Our current pessimism will make us sick before too long and our weariness will be replaced with a determination to make things happen again. Sometimes an election can change the public mood, sometimes ideas and inventions from outside politics emerge and inspire us to see things differently, from trains to automobiles to science to economics to the internet.
We’ve become somewhat jaded because progress has been so fast and we’ve seen so much. Right when real estate seemed to be the movement to great wealth, happiness and security, our frenzied optimism created a bubble that quickly deflated and now pessimism has set in. Like the internet frenzy of the nineties, we moved too fast and expected (demanded?) too much and now reality has set in. Maybe our coaster roller rides are making us weary, or maybe we are growing out of cheap thrill rides and maturing as a people in preparation for a more stable and realistic future.
I do know that we are a people who don’t stay in gloom too long. We move on and continue to build and to grow, in spite of the predictions of our downfall. Predictions of our demise have been made over and over whenever we’ve hit a rough spot. It’s hard not to think they are true when all around us the talk is of everything negative about our society, our economy or our way of life. Yet, we keep on going.
In times like this, and I have been through a few in 54 years, I have to put things in perspective and look at what is really going on around me. Yes, business is much slower right now, but that’s natural. Reality doesn’t work in straight lines upward — there are zigs and zags. I suspect in 2009 we will have had enough gloom and we’ll buckle down once again, solving problems, building new things, thinking of new and better ways to live and prosper, all with a better attitude.
The shake-out in real estate was natural and needed - it was over-heated and there was no way to sustain the growth. People will begin looking at homes as extensions of themselves and not as cash flow investments. The road back will be gradual, as it should be. All those who have been negatively affected will adjust, banks will adjust, the real estate industry will adjust and all will be mended, but not without thought and effort.
What will the real estate industry look like going forward? It will be less sexy for one thing - in fact it may not be sexy at all. I have a feeling people will look at homes in a much different way that has to do with long term plans. Yet where we live is so imortant to us it will still be a vital part of our lives. Americans aren’t renters by choice, although for a few years many Americans will most likely have to rent. This presents a challenge to the real estate industry — how to meet the growing need for rentals.
There will be a demand for good rentals in areas where people want to live. There will most likely be a big need for creative arrangements having to do with lease/purchase and maybe alternative financing. Many people who were credit-damaged or just don’t have a downpayment, will be looking for ways to create future security when it comes to housing. Some will need a couple of years to rebuild and they will want to find ways back to ownership, or TO ownership for the first time.
As real estate professionals we should be thinking of how to meet these needs. The challenge will be to find ways to make a living off helping people work out long term goals, at least long term compared to the quickness of buying during the last five years. Property management and investment strategies will become a focus for real estate pros and quick big bucks won’t be easy to find. Throwing the sign up and getting multiple offers will be a rare occurence. Working with clients who are in an iffy middle land of financing problems will be common.
Have you got a plan? It’s time to earn our money or start another career.
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