This morning one of my new listings was on tour. It is an adorable mid-century modern home. This home has been maintained in very good condition. It also just underwent a $33,000 face lift, plus it has also been staged to perfection. See the listing below:
https://lbre.com/listings/6521-el-roble-street-long-beach-ca-90815/
There is no doubt that this listing is very desirable. This is not the question. What I questions is an agent automatically assuming that we will have this sold in no time with multiple offers, as this has been our recent past. This leads me to the disconnect between what IS ACTUALLY happening and what HAS BEEN happening in the market.
Our memory is often only as good as the last 5-10 years. When things start changing, people are still stuck in the emotional sentiment from their most recent experiences. If property prices have been going up for the last 10 years, people conclude they will always go up. If property prices have been going down for the last 5 years, then they will always go down. Understanding the market through this sentiment will usually have you right more times than not, as what is in motion is more likely to stay in motion. But in this 15 year cycle, there will be two turning points and several points of increasing and decreasing activity. We are NOT at a turning point from positive to negative, but we have decelerated from large annual gains to mostly flat.
While it is understandable for the general public to not have a grasp on the day to day movement of the real estate market, you would think that a full time licensed Realtor would have a grasp on the market. But you would be wrong. Most agents are idiots. Alright agents don’t take this personally. Even professional broadcasters like CNBC were espousing that stocks were still going to the moon even in the midst of the Dot.com crisis. It is a natural human tendency to resist change. I am sure that a socialogist could go into the 1,000’s of reason why, but as a general consensus, we humans as a whole suffer from group think, even when it is wrong.
The turning points in real estate fall into one of two categories, one a strengthening market and a weakening market. This can either be at a turning point like 1995-1996 when the market finally bottomed, or the top of the market that occurred in 1990 or 2007. In both instances the market reversed direction. Then there are markets that can accelerate or slow down. 2003 was a market that while already moving upwards took off, much like the parabolic upward swing in the stock market towards the end of the Dot.com bubble. The market now is experiencing a slow down from the recovery off the bottom in 2011-12.
Since the 2011 bottom, hot listings have regularly sold with multiple offers in only days and this has been true for many years. While not every listing sold with multiple offers in days, there was enough that did that this became the narrative. Today, we now see flat pricing, with modest price gains of only about 2% per year, an almost imperceptible amount. Yet agents are still living in the past. Why is this??? Because most agent don’t do ANY BUSINESS.
I just did a quick search of the MLS. There are 2,459 Real Estate agents registered as members of MLS in Long Beach. Yet there are only about 200 home sales per month. This means that the AVERAGE agent only sells ONE HOME A YEAR. But we all know the 80/20 rule and in real estate it is more like the 90/10 rule, because there are a handful of agents that sell 5 – 50 homes a year. If this is the case then at least 80% of realtors sell NO HOMES. So when you as a lay person, think that the average agent is an idiot. Well you are correct. Alright let me be a little more PC. These 80% of agents aren’t idiots, they just don’t know more than the average citizen.
So getting back around to the moral of the story. When any agent tells me something, I assume that they have no idea what they are talking about. And you should too! Most don’t.