I have had the nostalgic tug lately and so I dusted off my stack of LP’s sitting in the closet, bought a new needle for my turntable and listened to some albums I haven’t listened to since I bought my first CD player in the late 80’s. (By the way, I have some great U2 twelve inch singles)
Anyway, it got me thinking about the recession we were in when I graduated from Northeastern back in 1991. I graduated 3rd in my class in engineering but couldn’t find a job. I moved back home, took some odd manual labor jobs while I sorted through every newspaper, every day. I mailed out resumes, waiting weeks for all those denial letters and occasionally landing an interview. All the hard work finally paid off and someone offered me a job and I went on to a successful engineering career. We came out of that recession and the company that hired me went on to have a pretty good run as the economy turned around.
Now I don’t presume to have all the answers as to when the economy will turn around this time, but what I relate to my experiences is that the successful people (companies) know what their goals are and set a plan to get there. How does this relate to today’s real estate market?
Well, let’s start by looking at the seller’s perspective. If you are a current homeowner and looking to sell your home then you have a goal. Within that goal there are financial and emotional ramifications, which may or may not be at odds with one another. When you owe more on your mortgage than your home is worth then you are in a short sale position. The benefits of going through the short sale is that you achieve your goal (to sell the house) but at the expense of some other terms. You may have put money down and at risk of losing that money. There will also be a dip in your credit. Even in a non short sale situation, the perceived loss of equity can leave a bad taste in someone’s mouth. Ultimately though what I have seen is that the relief from feeling trapped outweighs the negative consequences. This is especially true when someone is moving to be closer to family, to be in a better school district or for a job change. Because then the ultimate goal is achieved.
A buyer will always ask the question, “What’s going to happen with prices?” First time homebuyers don’t know what it feels like to sleep in your own home for the first time. Sort of like when people tried to explain to me what it was like to have kids before I had kids. I just couldn’t get it, but now I do! I still remember that first night going to bed in the first condo my wife and I had bought. I laid down that night and thought about how it was mine! No one could evict me, my parents couldn’t tell me what to do and, most of all, I really wanted to take care of it. So ultimately, while very important, is price really the most important thing when you are buying a home?
Everyone has a budget and everyone has a certain tolerance for pain. We need to manage home sales and purchases within those parameters, but what is really most important is how you feel the day after. Set your goal, frame it with realistic criteria and parameters, and go for it!
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