A bit of a rough landing

The power of positive thinking is a wonderful concept. I asked someone today how they respond to the oft-asked question, "How's the real estate market?" He replied that he usually says "Great, if you're priced right." Now, I try hard not to cross the line between being realistic and being pessimistic, but that's a little like asking someone who was on the Hindenburg, "How was the flight?" and having them respond, "Great, but the landing was a bit bumpy."

We are in the midst of a fairly major real estate correction - a polite term - not unlike the correction to the overheated stock market of the late 90's. I don't believe that we in Michigan had quite the investor frenzy that states like Florida and California and Colorado had, but we had our share of investors (house flippers) driving up the market and we certainly got used to double-digit home appreciation for a while in the late 90's and early 2000's. Many homeowners became convinced that that could continue refinancing every 2-3 years and taking more and more equity out of their homes each time. Of course the lenders were more than happy to encourage that behavior and they found lots of appraisers to go along with the charade. After the 9/11 terrorist incident, when the auto industry stumbled and things slowed down, all of a sudden people began to realize - "Gee, maybe I'm in a bit too far." But is was too late for many and the foreclosure rate that we see today is the result. It is a bit of a bumpy landing.

The amazing thing about the Hindenburg is that only 36 people of the 97 people on board died in that fiery crash. So, the optimistic view of that tragedy would be that "Hey, most people on board got out." Will most people in the current market make it out OK? Likely, they will. Many may be a bit disgruntled at what they ended up getting for their homes; but most, like the 61 people who made it off the Hindenburg, are in better shape to set an aggressive market price and jump than to stay on a burning ship (an overpriced house) and ride that puppy into the ground. We're in a bit of a bumpy landing right now, but we'll all make it. in aviation they say that any landing that you walk away from was a good landing. Maybe we need to take that viewpoint on this real estate market.