PET PEEVES: Real Estate Hype and Realtors Who Do Use It

I read an article in my local paper recently by a corporate real estate sales person which irked me to no end. In it he ´hypes´ the current market as having reached bottom and now accelerating upward. "Don´t miss the boat," he implies, "lest the new ´boom´ set sail without you!" Pure unadulterated hype designed to scare a buyer into the market now rather than later. Peeves me - you, too?

In my area, San Diego County, California, we are not near bottom yet. The reasons for this are many, but the foreclosure numbers alone indicate there will be large numbers of homes coming on the market at deflated prices for an extended period. This factor in itself will inflate the inventory considerably. Supply and demand applies to real estate especially. Bank owned property in the market in large numbers is never a good thing. Banks will and do accept offers well below market value. That sale becomes the next comparable for the neighborhood causing sellers to adjust their listing prices downward – which they resist to the max.

Here in San Diego, there was a small increase in sales activity and even prices for April over March. That is to be expected as spring - summer is the peak buying period for houses. Is this slight upward movement enough for realtors to begin ´hyping´? Hardly. Even the experts advise that a trend won´t be discernable for months.

In the San Diego Union - Tribune (Tuesday, May 20) DataQuick analyst Andrew LaPage is quoted as having the little blip of positive activity pegged when he says "For the most part, this is a good, old fashioned blue plate special - this is discounts spurring more home sales for the most part." In other words, prices discounted by sellers of short sales, which are becoming trendy, or bank owned sales. Not by eager sellers willing to accept rock bottom prices. Not yet.

LaPage and other experts caution that the burgeoning market of the past has not returned as of now. And it may take upwards of a year to do so in any positive fashion. Increased sales in April were highly influenced by 35 % (869 of 2475 sold) being on foreclosures. The current San Diego market inventory of 18,000+ with a sales factor of @3000 a month won´t deplete inventory much even if another house doesn´t come on the market. However, foreclosures will continue to be added to inventory for the foreseeable future. These will influence asking prices.

Buyers tend to ´wait and see´ in this type of market. That is their prerogative, but that attitude frustrates realtors to no end. Without buyers, they have no earnings as real estate is a commission only business. No sales, no income. So, there is a tendency in these times to try to influence the sideline sitters into the game, ready or not. This is where my pet peeve, hyping, comes into play and where you will begin to see such pontificating as "Better get on the buying train now before it is too late!" Or, "Prices are on the rise and the market is heating up…don´t miss out!"

Now, I do not begrudge a sales person trying to persuade me into buying something if they use fair and accurate tactics and numbers. I do take issue with those who would use puffery in their attempt to sell me their wares. That has become an all too common trait of real estate sales persons – some of them, that is. Since homebuyers are dependent on expert advice, that advice must be accurate and unblemished by hype. The realtor is bound by ethical standards to give an accurate assessment of every possible ramification of buying or selling the home in question. Even if it is not positive in nature.

Can we expect a lone realtor to determine the exact bottom of the market for a potential buyer? NO! Not even the most esteemed experts know exactly when the real estate market is at bottom. What the realtor must do is give the best assessment possible and the best advice they can muster, and let the buyer decide - without hype. The buyer who will keep their home for an extended period can and should buy when they see fit and feel it is comfortable to do so. Real estate prices have always been cyclical in nature - what goes up comes down – and then rebounds after a spell to even higher levels. A home bought with the intention of it being a home first and an investment second has always been a good investment.

The overheated market of the recent past was fueled in part by speculators and so - called ´flippers´ (greedy little buggers, I say) encouraged by realtors to a some not small measure. Their hyping lead to overpricing and an unhealthy market. Realtors must accept partial responsibility for this current disaster along with their cohorts, mortgage brokers. Realtors are cautioned to proceed cautiously in these times lest they cause false hopes and unmerited buying before it is the ´right´ time.