As a Realtor, I’m certainly as susceptible as anyone to wanting to pass along some upbeat news. Sometimes, that cheeriness comes in unexpected forms! One article that really impressed me this week was the contribution by James Grant, included in the New York Times’ collection of eleven expert economists’ opinions about how long the recession will last.
Grant, best known as the editor of Grant’s Interest Rate Observer, wrote that “the truth [is] that bear markets end when investors give up hope. Hope sustains life, but misplaced hope prolongs recessions.”
Gloom is good
Grant’s thesis is that bad times are born out of an excess of good times. “People overborrow, overpay and overindulge.” What is needed, he says, is a push to help motivate reluctant owners to part with the assets they can’t afford. “Today’s low prices, painful though they may be, are the market’s own shovel-ready stimulus. Before you know it, the stock market, and the residential real-estate market, too, will be on their way back up again — just don’t ask when.”
Chicken Little and friends
Toronto-based recruiter Gavin Pitchford has a great story on his blog, titled “Chicken Little Takes Over.” This is a real-life anecdote, which reminds us that the world of Dilbert wasn’t just drawn out of thin air! As in previous recessions, the pain is being exacerbated by knee-jerk responses that are just totally out of proportion.
In real estate, the key element is predictability. For a buyer today, there are very good reasons to purchase a home when prices are low and rates are low, too… but those buyers need to have confidence that their jobs will continue. For a seller, it might make sense to take a price that’s 5% or 10% off a peak valuation, but those sellers want to know that they can expect a reasonable result in a reasonable period of time.
James and Joanne's Toronto 