What takes hold of women on Black Fridays? It’s like a perfect storm of planned group hysteria, guaranteed bargains galore, and shopping, shopping, shopping. Realizing how many women will take umbrage to this, I hereby stipulate only a smallish minority participates in this annual ritual of dueling plastic at dawn.
Pardon me — did I say dawn? My bad. How ’bout 4 AM?! And this after coma inducing feeding frenzies the afternoon before. I guess when the monkey needs feeding, energy isn’t a problem. 🙂
I see on the far horizon the possible sighting of Black Friday, The Real Estate Version. As my crystal ball is as cracked as yours, I’ve no idea whatsoever when it’ll begin. I’m sensing it though. It’s coming from that spot located in the back of my head, where all the small voices reside. This voice is barely audible. I’m not even sure if it’s the right voice, but I know one thing — it’s louder today than it was last month.
Like malls around the country, holding the fort against the hordes of shopping junkies, there is method to their madness. There’s a clearly perceived empirical benefit driving them. I have to believe that, cuz my own mom talked my own Much Better Half into participating. Yep, I awoke this morning just before 10 from my expertly induced Thanksgiving coma, to find Trophy Wife asleep on the couch in front of the TV. Nothing like doing over five hours of pre-dawn battle with Black Friday Kool-Aid drinkers I guess. 🙂
Let’s create an analogy here to the current real estate correction.
Assuming the annual January clearance sales will follow the holidays as night follows day (for Black Friday participants, kinda like the hair of the dog) let’s call post January, The Shopping Correction.
The RE Correction has lasted for over two years now, or roughly the equivalent of these things historically. For shoppers, going from January to Black Friday is an eternity, much as this correction must seem to most who’re feeling the pain of the RE version.
What if, as my little voice seems to be saying to me now, there are folks here and there, who’re thinking they should be buying now, and in fact are doing just that. A perfect market in which to check this out, might be Phoenix, possibly the biggest winner in the cartoonish appreciation sweepstakes. They’re also being hit the hardest by the correction, or so it seems.
Here in San Diego our inventory is roughly speaking, about half of what Phoenix has been showing. Phoenix has been experiencing more sales lately. It could mean nothing, one of those inexplicable blips on a chart for which historians endlessly ponder. Or, it could be where we pinpoint the earliest signs of the beginning of the end.
Here’s the potential perfect storm.
Builders, as Brown and Brown is seeing almost everywhere we go, are still putting up a macho front, but are crumpling like cheap lawn chairs bravely, but mistakenly taking on huge Aunt Louise at Saturday’s BBQ. This only exacerbates the problems caused by the huge inventory of used homes in the region. Those two storms, desperate builders and monster lisiting inventories — and all you need to ignite the perfect storm is the Perception of — “Hey, these are pretty good deals.”
Enter the Canadians.
They seem to be, at least potentially, taking the lead here. They may be our friendly imported Kool-Aid mixers. Combined with their own perception (very real) of their newly acquired currency edge, and a bunch of severely reduced-priced homes, offered by homeowners and builders willing to run naked in the streets for a sale — and you may have found the recipe for a change in the real estate climate.
Or not.
Look, there are folks out there who are not only drinking the Kool-Aid, but apparently throwing in ingredients provided by our ’60’s friend, Timothy Leary. Anyone who says prices will fall a total of 80% from their ’05 highs didn’t get their drink mix from Vons. 🙂 Likewise, those on the other end of that psychedelic rainbow who want us to believe universal appreciation is just around the corner.
Those camps are dealing with their own perfect storms. 🙂
So many times we’ve seen so called outsiders show the way. Our Canadian friends may be doing just that favor for us now. Wouldn’t the irony be delicious, if we look back a year from now and say they ignited the turnaround? They’re coming here because of a perceived currency advantage, and only secondarily for the depressed real estate values. You never know what wild card factors blend themselves into the equation. Also, let’s not ignore the Europeans, who’re now shopping ’till they drop in the good ol’ U.S. of A, talking advantage of our falling dollar and superior product quality. Don’t think for a New York minute they’re only buying sweaters and ties. They’re getting more than their share of great local real estate deals. It’s been in all the papers. 🙂
So here’s where we are now.
Bargain hunting foreigners, armed with a currency advantage, arriving at their favorite depressed real estate markets. Waiting to greet them are the above mentioned builders, and homeowners, ready, willing and able to make their trips, ah, worth while.
Potentially, the Perfect Storm is in the making. It could be taking place, one sale at a time, in local markets around the country. Apparently Phoenix is seeing at least their share. I’ve received a few inquiries myself — one from a real estate investment broker. North of our border, will it become viral? Don’t forget, their markets haven’t crashed, and are doing well. For them, we’re the promised land of super bargains at 4 in the morning. 🙂
If this is happening, very slowly but surely, what might be the result? Well, in opposition to their nature, the media will be forced to report increasing sales. (How ’bout a 36% increase in sales in the West for September?) They’ll break out in hives, but the public will know. They will, in unison, be giving us the RCA Dog Look. You know the one.
That’s when the seeds of a returning confidence will be sown. The reporting will take place. Will the seeds take root? Or are we back to the blip-on-the-chart scenario?
Tune in next year to find out if the crazed women of Black Friday taught us a lesson — or not.
By the way, I gotta new pair of Dockers while I slept in today. Life is good. 🙂
My personal take on the market correction? It’ll be done when it’s done. Pretending to know its life span, or what exactly will presage its ultimate demise, is entertaining only if you don’t take yourself or your thoughts on the subject too seriously. My experience with these things goes back to the ’69-’70 recession.
Corrections come and go. Their beginning and ending are pinpointed only long afterward. So when you read about it being over, know you’re reading an historical account, and not a prediction.
Brian Brady says:
That currency edge isn’t perceived, it’s real… UNLESS, you think the Canadian economy will outperform the domestic economy. The Canadians know that just ain’t so; that’s why they’re buying here.
November 23, 2007 — 9:04 pm
Jeff Brown says:
Brian — True, on both counts. I used ‘perceive’ to show reality may exist, but until it’s perceived as reality, some concoct their own. 🙂
November 23, 2007 — 10:13 pm
Jeff Brown says:
Brian — True, on both counts. I used ‘perceive’ to show reality may exist, but until it’s perceived as reality, some concoct their own. 🙂
That said, I’ve heard two Canadians already tell me that even though much of Canadian real estate is still rising in value, they’re looking south because of two reasons. A) If we corrected, they must be about to B) Bargain prices combined with the currency edge was too enticing to pass up.
November 23, 2007 — 10:16 pm
Sean M. Broderick, CCIM says:
Jeff.. I got back from work this afternoon and found my office littered with receipts, like the rose peddles I’m suppose to lay out on Valentine’s Day, from the good hunt my wife, mother-in-law and sister-in-law experienced in the early morning hours. They’re obviously not watching CNBC, but if the correction news hit Oprah, then we’d have something to talk about..
November 23, 2007 — 11:11 pm
Jeff Brown says:
Sean — Now THAT’S funny.
November 23, 2007 — 11:26 pm
Benjamin Bach says:
Brian, you’re exactly right as to why we Canadians are looking at buying down South. In fact, I’ve been meaning to call you about financing some of that, and will drop you a line right now.
Jeff, great article as always!
November 25, 2007 — 12:14 am