Wednesday, August 13, 2008
An Old Pro’s Market Perspective
Dear Sue
Everyone is talking like this is the worst real estate market we have ever seen. Some even liken it to the Great Depression of the 1930s.
Having lived through the Depression as a boy, I can tell you it is not even close. During the Great Depression 40% of US banks failed. Depositors lost everything. There was no such thing as a federally backed deposit. Investors jumped out of windows. Farms and factory’s went bankrupt. Unemployment was at a staggering 25% in 1933. It is 5.5% today. Shantytowns and breadlines were everywhere.
I remember the men down on their luck coming to our back door for food. My mother fed the poor men we all called “hobo’s”. We all knew in those times that anybody could be begging for food.
We have experienced REO markets during every real estate cycle, approximately every ten years. Good businessmen plan around downturns because they know they are inevitable. Conservative homebuyers live below their means and plan for down turns as well.
Back in one of the “other” downturns, many cycles ago, I was working for builder George Holstein in Southern California. I was in charge of marketing. We had been selling homes at the Eastmont tract in Orange on a land contract. (You experienced agents know what a land contract is.) I think we were asking for $95 “to move right in!” The contract was for 3 years at which time the buyers would be required to get the necessary bank financing and pay Mr. Holstein off. The contracts just covered the loan payments that Holstein had with the bank. His goal was to just cover his carrying costs. He figured that he would get some of the homes back on the “drop dead date” (due date) in about three years when the original land contracts were up.
Three years later the folks who couldn’t come up with the financing started moving out. Some of the homes were in terrible shape but as history repeats, they were worth much more than the original price. As planned, Mr. Holstein cleaned them up and resold them at a profit.
During the period of the many move-outs, we ran ads for “Mr. REO.” We didn’t have a sales office so we borrowed a little RV trailer from our sign painter. We had him paint the trailer bright yellow and parked it on a side street close to the project.
Our ads directed people there. It was staffed by an old real estate agent named Rollie Jones, AKA Mr. REO. It was working well until one night the Orange police took the trailer and impounded it in their yard. The trailer contained MR REO’s sales contracts and paperwork. We got it out and continued the Mr. REO campaign but without the yellow trailer.
You buyers out there need to get off the fence. Interest rates are starting to creep up from 5.5% to almost 7% in the last year. Every percentage point is worth a good $100 more per month on $100,000. Get online and check out the rent vs. mortgage comparison charts. They should be easy to find.
Markets go up and markets go down. When they are on their way up people think it will never stop. When they are going down people think it will never stop. But it will. It always does.
Three years from now this market will be looked upon as a fun and challenging time!
Sign me
Mr. Seen It All
Sue says, "Listening to the Old Pro is a matter of Good Home $$s and Sense!"
Everyone is talking like this is the worst real estate market we have ever seen. Some even liken it to the Great Depression of the 1930s.
Having lived through the Depression as a boy, I can tell you it is not even close. During the Great Depression 40% of US banks failed. Depositors lost everything. There was no such thing as a federally backed deposit. Investors jumped out of windows. Farms and factory’s went bankrupt. Unemployment was at a staggering 25% in 1933. It is 5.5% today. Shantytowns and breadlines were everywhere.
I remember the men down on their luck coming to our back door for food. My mother fed the poor men we all called “hobo’s”. We all knew in those times that anybody could be begging for food.
We have experienced REO markets during every real estate cycle, approximately every ten years. Good businessmen plan around downturns because they know they are inevitable. Conservative homebuyers live below their means and plan for down turns as well.
Back in one of the “other” downturns, many cycles ago, I was working for builder George Holstein in Southern California. I was in charge of marketing. We had been selling homes at the Eastmont tract in Orange on a land contract. (You experienced agents know what a land contract is.) I think we were asking for $95 “to move right in!” The contract was for 3 years at which time the buyers would be required to get the necessary bank financing and pay Mr. Holstein off. The contracts just covered the loan payments that Holstein had with the bank. His goal was to just cover his carrying costs. He figured that he would get some of the homes back on the “drop dead date” (due date) in about three years when the original land contracts were up.
Three years later the folks who couldn’t come up with the financing started moving out. Some of the homes were in terrible shape but as history repeats, they were worth much more than the original price. As planned, Mr. Holstein cleaned them up and resold them at a profit.
During the period of the many move-outs, we ran ads for “Mr. REO.” We didn’t have a sales office so we borrowed a little RV trailer from our sign painter. We had him paint the trailer bright yellow and parked it on a side street close to the project.
Our ads directed people there. It was staffed by an old real estate agent named Rollie Jones, AKA Mr. REO. It was working well until one night the Orange police took the trailer and impounded it in their yard. The trailer contained MR REO’s sales contracts and paperwork. We got it out and continued the Mr. REO campaign but without the yellow trailer.
You buyers out there need to get off the fence. Interest rates are starting to creep up from 5.5% to almost 7% in the last year. Every percentage point is worth a good $100 more per month on $100,000. Get online and check out the rent vs. mortgage comparison charts. They should be easy to find.
Markets go up and markets go down. When they are on their way up people think it will never stop. When they are going down people think it will never stop. But it will. It always does.
Three years from now this market will be looked upon as a fun and challenging time!
Sign me
Mr. Seen It All
Sue says, "Listening to the Old Pro is a matter of Good Home $$s and Sense!"
# posted by Sue Thompson @ 11:08 AM 
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