I had mail yesterday morning from “keith”, who is Lord of the Flies at HousingPanic. This is the first chance I’ve had to deal with it, and I might just as well ignore it. But there are issues that I think are worth addressing in a metablogical kind of way, in order to dispense with them.
Here is the entire text of the letter:
dude, you’re gonna be seen as the town fool in a few more weeks, if you aren’t already
I’d recommend toning it down a bit. Admit you were wrong, and give your clients (if you have any) good advice, not wrong-headed advice that doesn’t learn
Okay, fine.
First, I’m not going to be seen as the town anything. I get press coverage that other Realtors would kill for, and it’s basically worthless. I was cited first and most in an article in Phoenix Magazine entitled, “Where do the Valley’s best Realtors live?” I heard from one client, who was delighted to have seen the article but got the name of the magazine wrong. I have been published every Friday for almost a year in three regional sections of the Arizona Republic. I get phone calls when I’m controversial, but that’s the sole measurable consequence. We are very highly regarded by our clients, and we are fairly well known in the neighborhoods we farm, but, beyond that, we are not on anyone’s radar.
Not that I’d hate it if we were. We do very well with people who like to read — half of whom are colorful and struggling and half of whom are colorful and very, very prosperous.
Second, there is nothing for me to tone down. I believe the long-term prospects for the residential real estate market in the Phoenix are are very good, but I don’t make any short-term predictions at all. Alike unto “keith” and all those who buzz at his behest, I don’t know what’s going to happen in the future — with the only difference being that I know I don’t know it and I don’t affect to pretend to believe that I do. (Incidentally, I have no opinion whatever about other real estate markets, not even those that are proximate to Phoenix. It would never occur to me to hazard a guess about Tucson or Prescott or Flagstaff — or even Wickenburg. I don’t work in those places, so I don’t know the issues.)
There is a larger point to this, and that’s why I’m addressing this letter at all. This is it:
The world is large.
The world is larger than you think it is, and, even when you’ve just told yourself that the world is larger than you think it is — even then it’s larger than you think it is.
We conceptualize, abstracting from the relentless chaos of the senses to herd and shuffle things into manageable categories, so that we might reduce the world down to a size our minds can encapsulate. This is a good thing, in the main, but the map is not the territory, and the territory is not constrained by the map.
But that’s not a very comfortable notion, so instead we tell ourselves that we know what will happen — not because we know what will happen, but because we can’t stand not knowing what will happen. We strive to regulate everything we can, imposing upon reality the order and structure of a game, not because we actually can impose order and structure on reality, but because we want to believe that we can, even though we know we cannot. We are terrified of our ignorance and the perils it portends, but rather than amend that ignorance in the ways that we can, we prefer to deny it by affecting to have knowledge without a prior process of discovery.
This is not a recent development.
But it leads us to make rash and stupid statements that do not, cannot, bear up to rational scrutiny — which we then rebel against because we insist that we must “know” without having discovered, this in turn because we cannot allow ourselves quietly to acknowledge that we do not know what we do not know.
This is not new, either. The names change, but the game is ever the same, alas.
What will change “in a few more weeks”?
Almost nothing.
What will change in a few more years?
Almost everything.
What are the particulars?
Hide and watch. If you’re willing to admit that you don’t already know everything, you just might learn something…
Technorati Tags: arizona, arizona real estate, blogging, phoenix, phoenix real estate, real estate, real estate marketing
winged monkey says:
Gregg, that’s a very nice speech, as usual. You’re a very interesting man to read, even if your talent for putting together a sentence outshines the coherence of your philosophy. If I am reading you right, you’ve come around to the view (congratulations!) that as a realtor, you shouldn’t be telling clients that now is a great time to buy in Phoenix. As you have done many times in the past. Including at the market peak last November.
No need to tell us whether Keith and the other bubble heads, flying monkeys, etc. had a hand in bringing about this miraculous conversion. For those of us who buzz strictly on cue, when ordered to do so by Keith, (who is, as you have pointed out, our guru, drill sergeant, father-figure, and master), it is enough that you have seen the light, and joined the ranks of the enlightened. Buzz, buzz, buzz.
August 11, 2006 — 4:11 am
Nathan Hughes says:
As I’ve heard/read over and over again: “If you are not getting comments, then you are not being controversial enough.”
The way to get noticed in a sea of alternatives, is to not be like everyone else.
August 11, 2006 — 6:04 am
Greg Swann says:
You’re mistaken on all points. You might revisit 21 reasons to bank on the Phoenix real estate market… Real estate is a long-term investment. I believe there are good reasons to expect the long-run growth in values in the Phoenix area to eclipse — by far — any short-run reverses. No one can predict the future, but for the reasons cited in the article that brought you here in the first place, and for dozens of others I could name, the long-run future of the Valley of the Sun seems to be very bright. The immediate moment is a very poor time to sell real estate in Metropolitan Phoenix, and, for that reason, it is an excellent time to buy. It is conceivable to me that you are better at your job than you are at mine.
August 11, 2006 — 6:09 am
Todd Tarson says:
If a buyer has the credit and the means to afford a new home (or a new to him home) and is motivated to move because of relocation (maybe move up or down… heck even just move across town) and can identify a property for sale at terms he likes…
…Then its a great time to buy a new home.
Keith and the bubbleboys are investors and are concerned about themselves. Concerned about various market conditions that could put them in a bind perhaps.
They make some good points… but mostly they offer… panic. Panic is easy. If it bleeds it leads.
There’s a million ways to make a deal for real estate. Yet it always comes down to a buyer and a seller.
August 11, 2006 — 7:50 am
Greg Swann says:
> If a buyer has the credit and the means to afford a new home (or a new to him home) and is motivated to move because of relocation (maybe move up or down… heck even just move across town) and can identify a property for sale at terms he likes…
> …Then its a great time to buy a new home.
Sold. I agree with that assessment.
August 11, 2006 — 9:03 am
carefulwithnumbers says:
i just can’t figure you guys out. i think you and your wife are bright and caring people, and i believe (but can’t know) that you’re great realtors.
in one post, you’re gracious. in the next, you’re arrogant. as a matter of fact, so gracious at one point that i was going to respond in kind. however, before i got the chance, i was used as an example and needlessly called out in a full blown article (guess i should be flattered).
now, with regards to this article, i think you’re pretty much right on the money. keith’s message is off base. he puts a clear stake in the ground while accusing you of the same. none of us know what’s going to happen and you’re right to acknowledge it.
and i think that’s the problem. both sides promote only the points that support their arguments. the funny thing is both camps tend to argue significantly different points and the really funny thing is that they can both turn out to be right. the two sides as I see it? long term real estate gain versus short term decline.
i agree that in the long term, real estate will continue to increase in value. i also have no idea whether it will decline in the short term (but it sure seems like it will).
it’s also *very* convenient that people can play it fast and loose with the notion of “term”, whether it be long or short. it’s possible that gains could be anywhere between now and 10 years. it’s also possible that declines could last between now and 10 years. so, it’s really the definition of “long” and “short” that seem hard to nail.
i have a problem with keith because if i *knew* prices were going to continue to go down, i would hold off on buying. keith can’t know this and shouldn’t state it as fact.
that doesn’t let you off the hook though, because you don’t seem to acknowledge that it might not make the most sense to buy something that i can buy cheaper a month from now; 6 months from now; and possibly a year or more from now. i, of course, don’t know this, but neither do you.
what’s worse is you don’t even seem to accept the scenario. you talk about 6% long term appreciation without even acknowledging that when there are repeated double-digit year over year gains, that it might take a while for everything to even out to that 6%. and i mean a long while.
i don’t know the average length of time that people stay in a home, but i’d hazard a guess that it’s around 7 years. that means if prices fall for a few, level for a few more, and then you have to move, you haven’t really gained have you? heck, even if they’re just flat, you haven’t gained.
i’m sorry, but it can’t always be a great time to buy a new home. i’ll grant that there can be plenty of reasons to still go ahead and do so, but i wouldn’t say that makes it “great”.
finally, keith, i don’t know you or your blog (although i have heard of it), so there’s little i can really tell about you from a single short email. if i’ve characterized you unfairly, i’m sorry. i suspect there’s more history between you two, so i wouldn’t be surprised if there was more than a little frustration baked into your message.
August 11, 2006 — 1:05 pm
winjr says:
“i have a problem with keith because if i *knew* prices were going to continue to go down, i would hold off on buying. keith can’t know this and shouldn’t state it as fact.”
You appear to need to reach a conclusion, either to buy or wait. Do your due diligence, and act accordingly.
Swann won’t predict a short-term future because he either A) already KNOWS what lies ahead in the next few years and it would be against his better interest to publicly express that opinion, or B) is constrained from appearing bullish for fear of later being “wrong”.
It’s a cop-out, plain and simple. Yes? No? I’m a new client, moving to Phoenix next month. I tell you that I anticipate moving 3 years from now for another location. And your advice to me is … ? Do I buy? Do I rent?
BTW, Phoneix July sales, YOY, were down 46%, according to the Arizona Real Estate Center.
August 11, 2006 — 6:27 pm
Greg Swann says:
> in one post, you’re gracious. in the next, you’re arrogant. as a matter of fact, so gracious at one point that i was going to respond in kind.
Speaking only for myself (Cathy can speak in her own behalf), I haven’t meant to give you offense. You’ve been completely fact-oriented, and what I hope to do, in my affairs with other people, it to effect an optimal Prisoner’s Dilemma strategy — cooperate until betrayal, betray until cooperation. If I have failed in that with respect to you, I beg your pardon.
> and i think that’s the problem. both sides promote only the points that support their arguments. the funny thing is both camps tend to argue significantly different points and the really funny thing is that they can both turn out to be right.
This is correct. I’ve been amused by it all along. Particularly the accusations leveled against me for things I would never say.
> the two sides as I see it? long term real estate gain versus short term decline.
That we’ll have to see. I believe Phoenix will come through this better than other cities might.
I wrote this last November:
It snows and freezes there, so they have to build differently there than we do here, but a house that would cost $50,000 would comp to a home costing $250,000 here. Are houses in Phoenix over-valued? Are houses in Danville under-valued? Or is there a substantial difference in demand? The answer to the last question seems most significant to me, but we await the test of time. Even then, we’re talking only about Phoenix. Whatever turns out to be the case here probably won’t mean very much anywhere else.
And even that’s not cast in stone, no matter how bright our history. We’re in the midst of an eleven year drought. If we don’t get El Nino within the next few winters, things could change dramatically here.
> that doesn’t let you off the hook though, because you don’t seem to acknowledge that it might not make the most sense to buy something that i can buy cheaper a month from now; 6 months from now; and possibly a year or more from now. i, of course, don’t know this, but neither do you.
Indeed I don’t. Until a month ago, the upward trend of interest rates might have mattered more than prices, in any case, but you cannot know if prices will rise, fall or stagnate. What you can know is whether buying a home — as an abstract idea — best suits the totality of your values. If it does, it might prove to be a wise long-term choice even if you suffer short-term financial reversals.
I did a final walk-through with a very cute couple tonight, first-time home-buyers. The house we bought is the best of those available in that floorplan in that subdivision — and there were several to choose from. They’re buying it about $20,000 under the recent high sale, but that’s a pretty rubbery number right now. In a different market I might call it instant equity, but not now. I don’t know how to evaluate the home with precision right now — “Quick! Get Dr. Zillow!” — because I don’t know how this market is going to shake out. They’re 100% financed, 80% fixed, 20% ARM, with 3% coming back from the sellers for closing costs. They have an earnest deposit, but that should all come back. Anything left on their side of the HUD-1 will be used to buy down interest rates, so they’re basically out of pocket for inspections and the lender’s application fee. Call it $700 cash to take control of an asset worth somewhere between $240,000 and $260,000. That by itself is just amazing, and I am stunned every time I’m involved in a transaction like this. But the best part of all was their pure elation. Until today, they hadn’t let themselves dare to believe that this would all come together — even though it’s been a very smooth process. I can’t speak for them, but I think one of the sources of their delight was the idea of graduating to full adulthood. College, job, marriage — these are important milestones. But among the Middle Class, homeownership is a bright-line distinction. In any case, although the emotional benefit they will derive from owning their own home cannot be calculated, it is there nevertheless.
> what’s worse is you don’t even seem to accept the scenario. you talk about 6% long term appreciation without even acknowledging that when there are repeated double-digit year over year gains, that it might take a while for everything to even out to that 6%. and i mean a long while.
It’s possible, but I don’t see that as being very likely. The new home builders are going through an inventory clearance — exactly like a retail business because they are retail businesses. Some proportion — ask me afterward — of resale home sellers are not truly motivated to act: They won’t sell at the prices they are offered. After all this settles down, we will have given back some portion of the gains we saw in the boom. How much, how long and how long to get back to the December 2005 high are all questions that can only be answered post hoc.
> i don’t know the average length of time that people stay in a home, but i’d hazard a guess that it’s around 7 years.
Three to five years in the Phoenix area, on average. We wear houses like clothes, fashion accessories to fit certain lifestyles.
> i’m sorry, but it can’t always be a great time to buy a new home.
Very true. Last Summer was an excellent time to sell a house. We wanted for all the older folks in North Central Phoenix to cash out and move on while the money was there to be had, but of course they didn’t.
> i’ll grant that there can be plenty of reasons to still go ahead and do so, but i wouldn’t say that makes it “great”.
Stipulating that values could go down further than they have, it is possible right now for a phlegmatic buyer to pick up incredible bargains. People sell when they should buy and buy when they should sell.
> finally, keith, i don’t know you or your blog
I apologize for this, too. You arrived when all those others did and I mistook you for one of them. Hasty generalization.
> if i’ve characterized you unfairly, i’m sorry. i suspect there’s more history between you two, so i wouldn’t be surprised if there was more than a little frustration baked into your message.
I never knew of him before I first wrote about HousingPanic, and I’ve had but the one email from him. I’m not at all impressed by his mind, but some of the people who came here at his bidding are very sharp. Mostly the contrary, but some have been delightful.
As have you. Again, I’m very sorry if I have given you offense.
August 11, 2006 — 8:06 pm
winged monkey says:
Gregg, I certainly don’t claim to know the Phoenix market better than you. What I do say is that you — any realtor — has a direct economic interest in prodding clients toward sales. In terms of advice, that is going to mean, get your seller clients to lower the price, which I see you are already doing. It also means convincing buyers that now, whenever now is, is a good time to buy.
In the latter case, given that you have seen a completely unsustainable runup in prices in your city, driven largely by flippers and investers who are now either gone or toast and know it, now is certainly not a good time to buy. Much smarter to wait and watch. So your advice is now, by necessity, fudged; you talk about the long-term potential of your market, without bothering to try to say what long-term is. You talk about “graduating to adulthood” or some mystical milestone or “bright-line distinction”. These are all ways of playing on people’s deep-seated ideas that one must own a home in order to get ahead, even if one has the option to rent for hundreds or thousands less per month (and thus save that amount toward a future downpayment); even if it means leveraging to the hilt as this poor young couple has done, and will most likely end up owing more to the bank than their home is worth.
My point is, and there’s nothing personal here because the same can be said of all realtors, you aren’t a source of honest, objective, arm’s length advice. Would you ever tell a buyer client that now was a bad time to buy? No. Let’s face it. You wouldn’t. You roll the dice and make the pitch. But all six sides of your dice has the same answer: “Buy now.” As for the logic and reasoning to support that pitch, you make it up as you go along. ABC. Whatever it takes to get the sale. That’s why Keith and the other bubbleheads, despite their many faults which I have pointed out in clear terms on their own blogs, provide such a valuable counterpoint to the mighty river of bullsh*t flowing out of the real estate industry.
August 11, 2006 — 10:56 pm
Greg Swann says:
> What I do say is that you — any realtor — has a direct economic interest in prodding clients toward sales.
I’m going to bed. I’ll come back to this in the morning if I think more needs to be said. For now:
I don’t ever say anything except what I believe to be the truth. I sell millions of dollars worth of real estate a year because my clients know I never lie. I have clients who have done eight or nine transactions with me. They don’t keep coming back — and referring everyone they know — because they think they’re being manipulated. People who lie for money are criminals — or politicians — not entrepreneurs.
August 11, 2006 — 11:55 pm
carefulwithnumbers says:
Greg– i haven’t read the posts following your response to me, but all i can say is wow. and thanks. you confirmed my belief; you are genuinely good people (i hope Cathy doesn’t mind me lumping her in with you).
your response was direct and honest. buying a home is a highly personal decision and there a lot of factors that go into it, and i think the couple you’re working with couldn’t have made a better choice for a realtor. i wish them, and you, all the best.
August 12, 2006 — 10:33 am
Greg Swann says:
> you are genuinely good people (i hope Cathy doesn’t mind me lumping her in with you).
You’re very sweet. Cathy is a Genuinely Good Person — thoughtful, attentive, empathetic, equitable, forthcoming, considerate — I could go on forever. By contrast, I can be a real prick. It’s something I’ve been aware of since I was about 19, and I do strive to do better. But where being nice comes naturally to Cathy, I really have to work at it. Being rude, crude, abrubt, abrasive, eviscerating — these are no problem for me.
I looked at all your comments just now and I think we’ve left a question unanswered.
My take in the current market is that, if you know for sure that you will be selling in three years or fewer, you’re probably better off renting. If we stiuplate 0% appreciation for the first year, 5% for the second and 6% for the third, with selling costs at 8%, you’re up maybe $6,000 on a $250,000 house after three years — not including mortgage versus rent costs, maintenance, etc. By the fourth year, assuming the market settles down, ownership starts to look better, and the numbers get better and better from then on. But, all things taken together, and given that we might do worse than I’m projecting — and even allowing that we might do better — the short-term risk seems to dwarf any potential reward.
Even here, we seem to be both too particular and too general. An evaluation tailored to fit every detail might yield a different result. For example, suppose the subject property is a 2 bedroom, 1 bath historic home on a double lot selling for $30,000 under market without a lot premium. The lot split would be worth at least $100,000, and you could probably get a builder loan to add a Master Suite to the original house, substantially adding to is value. You could be out with a huge return in less than year. All other things being equal, absolutely nothing in real estate is equal to anything else!
August 12, 2006 — 10:53 am
Cathleen Collins says:
I’ve fallen behind in the ‘blog world over the past four days because I’ve been jammed up at business and home, leaving no time for anything beyond the essential. Fortunately, notwithstanding Dustin’s admonition against taking a few days off from blogging, Greg’s love for writing makes up for my slack.
So, this directed response to Careful With Numbers’ comment on this post is shamefully overdue: I’m truly sorry for my apparent offense. That was never my intention. I thought we were enjoying friendly banter. This is a major problem with writing for most people (not Greg, I think, but certainly me)… when we write we can’t hear the intonation of voice nor see the dancing or darting of eyes.
You were actually closest when you said
When I do start to lose ground with the volume of weblog entries, I may skim past comments that strike me as noise, but there are a few writers (you and Todd Tarson come to mind) who I believe are thoughtful, intelligent people, from whom I can learn. So I do slow down when I see your comments, and when I’m too busy to read them, I save them for Sunday evenings such as tonight, when I can catch up. I do hope you’ll accept my overdue but heartfelt apologies.
Now I must go catch up on everything else I’ve missed since Wednesday…
August 13, 2006 — 8:01 pm
carefulwithnumbers says:
Cathy– i think you can see that i suffer from the same problem! i guess i just need more hours in a day.
anyway, thank you for the apology, but in the end, none is necessary. you write quite well and i simply overreacted. i think i’ve never had one of my comments turn into a full blown article and it must have just caught me off guard. guess i must think less of my commentary than you do!
thanks again and i continue to follow this blog. Greg is simply prolific and i find all of what you both contribute very interesting (and educational); even when i don’t have much to add!
August 15, 2006 — 12:28 pm
Jeff Brown says:
Where to start. I get so tired, bored really, with these doom and gloom guys. I’m second generation real estate, grooming the third, and I’ve seen just about every market that can happen in real estate. (and no, I don’t mean that literally) Every time the market has a somewhat sustained upward movement you begin to hear from the ‘oh my God, we’re all gonna die’ guys. I heard them in ’76-79, ’86-90, and non-stop since around late 2002. They’re the same geniuses who’ve promised us ‘skyrocketing’ interest rates since 2001. Of course when and if the rates actually do go up more than 1% I’m sure they’ll come out of the woodwork honking their ‘I told you so’ horns. My point?
These guys like to hear themselves talk. I’ll be even plainer. If most of these Chicken Littles talked while walking on your lawn, you’d have the greenest lawn in AZ. I’m reminded of the global warming debate. Two of the top ‘scientists’ promoting the end of the world as we know it, are the same chuckleheads who wrote the so called best seller 30 years ago titled, (drum roll please) The Coming New Ice Age. (not exactly sure of the title)
I currently represent clients owning more than $32Mil in AZ real estate. Some of them bought there, some traded to get there. Most of them got in around 2004 & ’05. I told them they’re in for the long haul, and that the earliest I expected to sell would be Spring of ’07. That’s looking doable now, but it’s too early to tell. In any case, I’m very bullish on the Phoenix region long term. And for Donny Detail, long term for me means longer than a year from today.
So Greg, you’re doing a bang-up job both with your clients and blog. Keep up the good work, and try not to listen to that little guy on your shoulder who keeps telling you to liquify the the occasional folks from Little Bus City.
Jeff
September 6, 2006 — 6:35 pm
Greg Swann says:
Jeff, you’re a riot. I went to your weblog just now. Sage advice and fun reading. I’ve blogrolled you.
September 7, 2006 — 4:57 pm