I’m feeling a bit like the boy who cried wolf from the children’s story. In his case he started crying “Wolf” to attract the attention of the town’s people, so that they would come running and he wouldn’t be lonely. He was lonely and bored spending all of his time tending the sheep with nothing much happening and no one to talk to.
As a Realtor, I look back over the last 3-4 years and can see how many times I cried “Wolf” or at least a real estate equivalent of that – “we’ve bottomed out and it’s time to sell.” I know that I’ve written blog posts to that affect at least four times in the last few years. I also know that I’ve been wrong all four times. In fact, things just kept getting worse – home values continued to sell, foreclosures and short sales continued to dominate the market and would-be sellers continued to sit on the sidelines.
In my case I suppose it was hope that things had bottomed out as much as anything, that motivated those posts; although it did get pretty lonely there for a while, with my listing inventory down to just one home for a while. I guess I was trying to convince myself as much as any reader of the posts that things had finally taken a turn for the better; or, at least, that they had stopped getting worse as fast. In fact the last couple of times it was that statement that the bleeding hadn’t stopped, but at least it had slowed that served as the most “positive” aspect of the post.
The other things that I noticed is that the recovery was like a mirage – always on the horizon, but never reachable. Starting in 2008, and based upon the combined opinions of the pundits of our industry, I predicted that 2010 would be the turn around year for real estate. Then it was to be 2011 for sure. Now a recovery starting in 2012 is iffy, but is still being held up by various economists and experts as at least the level off and start back year. We’ll see.
One thing that I’ve been fairly consistent about is that any recovery isn’t going to quickly recapture the lost value that this recession cost all of us. I’ve been saying a least a decade and now it looks more like two decades to get anywhere 2006 value levels. In some areas that will never happen. I’ve also been citing this recession as a fundamental reset of our economy in many areas, especially in the rust belt.
One can only get so far using analogies for the current situation, since analogies depend upon being able to relate the object of the analogy to something that has happened before that people are familiar with. We don’t use the Great Depression all that much (other than for convenient statistical comparisons, because most people alive today didn’t live through the Great Depression.
After the Great Depression economist calculated that it took 17 years for homeowners to recover the home value lost with the economic collapse. It may well take that long this time, too, to recover the value that we’ve lost. That will vary state by state and city by city. I saw a repot today that stated that homes in some areas like Pittsburg had lost as little as 1% of their value during this recession; while other areas, like Detroit or Las Vegas have lost 50-60% of pre-bust home values. Unless hyperinflation is allowed to run wild during a recovery, it is easy t see why it will take so long to recoup those kinds of losses.
So, is that dust on the horizon the cavalry of a recovery riding to our rescue or more recession Indians here with more loss arrows? I gotta go with the theory that 2012 is the year of the turn around; otherwise, it gets too depressing. I can see the bottom from here.
Yep. That’s my story and I’m stickin’ to it.
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