Monday, January 21, 2008
The FUD Market…
Way back when I sold computers (seems like a previous life now), we had a term for the stuff that one competitor in particular would do to “freeze the market” until they could get out a product to compete with something that might have been newer and better than their current offering. It was called FUD – Fear, Uncertainly and Doubt. In those days it meant that the big competitor would send its sales minions out to spread FUD in the market by whispering in the right ears innuendos about the competitor that would cause potential buyers to pause, because of their fears, uncertainties or doubts about the new and better product or about the company that brought it to market.
In the real estate market these days, I’m seeing a market frozen by FUD, but these fears, uncertainties and doubts have mostly to do with jobs and the future. The spread of this FUD is also certainly not by a whisper campaign – the news media is screaming from the rooftops about the loss of jobs locally and the impending national recession. A case could easily be made (and has been by some politicians looking for Michigan primary votes) that Michigan has already been in a one-state recession for the last 2 years.
I suspect that labeling this a FUD Market makes more sense than labeling it a Buyers Market. We moved well past the simple mechanics of a Buyers Market over a year ago. Not only are there more houses on the market than there are buyers out looking (a key part of the definition for a Buyer’s Market), but there are also far fewer buyers out looking to buy anything. FUD is keeping the buyers out of the market.
We’re still seeing reasonable, albeit slower, activity at the lower end of the market, especially by bargain hunters. What we’re not seeing in this market are the buyers who might have been out there looking 2-3 years ago because they just got a big promotion at work and want a bigger house. We’re not seeing the union workers who put in lots of overtime and have money to spend on a “move-up house.” Recently the majority of “buyers” are looking for foreclosure houses that they hope to steal, so maybe we should call it a “Thieves Market.”
Now we’re seeing the stock market take a nose-dive, and hearing talk of a Bear market there, much as we had in 2000-2001. All of this just adds to the FUD in the housing market. So, what will it take to get past the FUD and get back to a more normal market? Time, obviously; but, I think the moves that are afoot in Washington to get bills passed and signed to modernize the FHA, to help struggling foreclosure victims and to stimulate the economy a bit, will all help at a national level.
Locally, we’ve got to get through the next round of layoffs, buyouts and plant closings in the automotive industry before we can start to turn things around. It will likely be mid to late-summer before we are even at bottom in Michigan. There's also hope coming out of the recovery that Ann Arbor is experiencing, following the departure of Pfizer, much of it driven by entrepreneurial start-ups. We'll need a big dose of that in the Detroit area, once the dust settles fromthe automotive shake-ups.
For sellers inthe real estate market, this all means the 3-P’s of real estate (Patience, Perseverance and Price) are more important than ever. For buyers it means that now is the best time to get out and find good deals on properties before the turn around sends prices and mortgage rates back up.