Life Isn’t Linear

People are naturally drawn to trends. We like to think that there is order in the world and that life progresses one step after another. For that reason, we are attracted to graphs that are neat and tidy and move left to right in an upward trajectory.

Unfortunately, life doesn’t work that way. Life is two steps forward, one step back, with a step or two to the side. That’s why it is important to keep the long-term in mind, even though our daily lives are focused on the short-term.

In the short-term, it appears that foreclosures will continue to plague the real estate market as any recent improvements may be as a result of the foreclosure moratorium. Therefore, we should expect more inventory to hit the market, and more inventory means lower prices if demand fails to keep pace.    

That fear is that sliding prices mean an increase in negative equity, which is already a concern.  An increase in negative equity could mean more foreclosures, which means more inventory, which means more pricing pressure. You get the picture; it’s a vicious circle.

However, it might not be all that vicious. We are talking about national averages, after all. And dealing with averages can be deceiving. For example,  place Warren Buffett, Bill Gates and 10 of us ordinary-folk in a room. If you were to average the wealth, it would suggest that everyone in the room is a billionaire, which is why averages can mislead.

This short-term perception has undoubtedly kept many naive home shoppers out of the  market. However, real estate is a long-term proposition. Over the long-term, real estate is a good deal, and never more so than when purchases are made in a temporarily price-depressed environment with very favorable financing rates (and 5-percent 30-year fixed-rate loans are very favorable).

I believe and have been repetitive on the sentiment that it is buyer perception and media nay-sayers that have continued to affect our local real estate market. It is worth repeating! The Dallas market is far better off than many of other urban markets around the country.

Leave a Reply