The Weight Loss Process and the Real Estate Market: The Same Animal in a Different Form

by Cooksquared

Real Estate Investor

Author website

Much like the real estate market my life has taken on significant changes over the past two months.  Fortunately, unlike the real estate market, my life has been on the upswing.  A major focus for me has been weight loss, resulting in my dropping nearly 40 pounds in about two months.  As I am not one for long personal stories, the major reason for sharing this is to relate how weight loss and real estate seem to go hand and hand.

The Realization

I am fat.  Plain and simple, one day I realized I was fat.  There were plenty of signs, quite obvious to others, which I chose to ignore: tighter pants, lower energy, the mirror, etc.  Eventually the mountain of evidence reaches a tipping point; a point at which, despite my best efforts, I simply could not ignore the fact that I was no longer the chiseled college athlete of six years ago.  For me, this point was when, on a whim that was clearly not thought out, I decided to weigh myself.  When the scale read 260 pounds and I officially weighed more than my father, it was a sad day.  The day became even sadder when my wife thoughtfully pointed out that the BMI for a person my height (6′ 2″) suggested that I should weigh 190 (thanks, dear).  

The real estate market reached this point about six months to a year ago.  Much like me, the market chose to ignore that fact that real estate prices were increasing much faster than wages.  Additionally, prices continued to increase at break neck speeds assuming the lowest interest rates in history would get even lower.  At the height of market gluttony, people were using homes as personal cash registers, spending as if the money created from nothing, would magically go on forever.  Then one day, the market hit a tipping point.  For the real estate market, my guess would be the subprime market disaster acted as this point.  At this point people begin to wake up and come to their senses.

The Action Plan

Getting back to the fundamentals of eating right and exercising brought me back to the land of the fit.  Starting by eliminating the delicious foods of Taco Bell, McDonalds, and other fast food crutches, I was able to initially lose weight quickly.  Next, I wanted to arm myself with more information about what I was eating.  Healthy items like granola and nuts pack quite a calorie punch, so sadly they had to go too.  Even salads can be deceptive (especially when you add bacon bits, cheese, and creamy ranch dressing).  By adding fun outside activities with my wife Natalie and Angel (our five pound Yorkshire Terrier), I was able to get down to the mid 230’s.

Similarly, buyers and sellers must now get back to the fundamentals of real estate.  Lenders need to get back to serious underwriting by looking at customers ability to pay based on their cash income and not their property’s appreciation.  Buyers need to understand that real estate is a long term investment, as such the simple buy low sell high approach works well.  Current homeowners need to treat their home like an investment.  When considering taking money out of their home, buyers should be looking to either put that money into a better investment vehicle (rental property, stocks, bonds, etc.) or using that money to better themselves and their family (education, job training, etc.).  Focus on putting money into assets that appreciate, again, a very simple concept that many homeowners got away from.  

Finally, sellers need to act like sellers.  The days of three buyers for every one seller have gone, replaced by the reverse.  Smart sellers will be armed with great neighborhood information, well read on the art and science behind selling a home, and equipped with the best real estate agent in their area.  A great agent and a great seller (in many markets it takes both) can get a home sold in any market, trust me, I sold a home in a very down market in Detroit.

The Future

Now at 215, I am at a cross roads.  I am physically fit, have tons of energy, and really enjoy eating healthy food.  Unfortunately the odds are against me maintaining this weight loss.  Many studies have proven that the majority of people who lose weight gain at least 5% more than their original weight back.  Lucky for me, my wife and I have made a life change.  Working together I have no doubt in my mind we will never see those large numbers on the scale again.  Only by being constantly vigilant, however, can I be sure.  Everyday the lure of Buffalo wings and Big Macs tempt me to lose sight of my final weigh target, but I will always remember that sad day on the scale.

Here is where my weight loss and the real estate market differ.  The real estate market has a surprisingly short memory.  While the market is well short of a recovery, it has shown a habit of repeating the same mistakes over and over again.  Lest we get too abstract, that means you buyer, you seller, and you homeowner, will have the same tendency to repeat the mistakes that have lead the market to where it is today.  Like it was easy for me to blame McDonalds, it’s very easy to blame the Fed and lenders for poor decisions made by buyers and homeowners.  The only way to avoid repeating this cycle is to act rational.  Money is rarely free, and when it is, it should be invested, not squandered.

People have great willpower for a short time.  Many people will be able to bootstrap themselves back into financial stability, much like I was able to work myself back to a reasonable weight.  Unfortunately, people also tend to be complacent and forgetful.  Remember the lessons of today and avoid this road next time, and trust me, there will be a next time, a next time, and then yet another next time…