The real estate market: Perception and Reality

Once a year we like to take a look at the late-summer real estate market.

What we’ve been reading in the media lately is pretty confusing.

If it baffles people who work in the industry, imagine how the average buyer or seller, or even potential buyer or seller, feels right now. Talk about “fake news!”

Here’s one example among the many misleading news pieces we’ve read.

Late last month, Yahoo Finance published an article titled “Goldman Sachs reveals what’s holding back the housing market.”

So, what did Goldman Sachs base its gloomy conclusion on? Chief among the reasons:

Tax Reform:

“The reduced tax incentives effectively increases a home’s cost of ownership.” What they neglected to add, which is significant, considering the average Yahoo Finance reader isn’t a 1 percenter or isn’t even remotely connected to anything Goldman Sachs-ish, is that this primarily affects wealthy homeowners, not the average homeowner.

Construction Labor Market:

Apparently, tightening illegal immigration policies have diminished the number of low-cost laborers these multi-billion-dollar corporations choose to hire.

“In the real world, however, there is a very limited number of potential employees in any given labor market. To attract more workers, you need to raise the wage rate,” according to Scott Sumner at the Library of Economics and Liberty.

Makes sense, right?

Instead of offering higher wages for American unemployed workers, the Associated General Contractors of America (AGC) has turned to the federal government with pleas to allow more of these immigrants to work here legally.

“When a reporter stops by, you [the builder] tell her that you face a “shortage” of workers, even though there’s someone willing to do the job” for a higher wage, Sumner concludes.

In other words, the reporter (and thus, the public) isn’t told that the reality is that there isn’t a labor shortage, there is a living wage shortage among those who hire the labor.

The truth is, the unemployment rate in the construction sector is 0.4 percent higher this summer than last and it’s among the top four unemployed industry sectors.

These are American workers, sitting on the sidelines.

Start paying more and the labor “shortage” will turn into a glut. Therefore, Goldman Sach’s claim of a labor shortage is quite misleading.

This is the perception that real estate consumers are receiving from many in the media.

The people spreading the perception may be folks who aren’t told the truth, such as the aforementioned reporter. They are definitely people who haven’t spent a day listing and selling real estate in the current market.

The reality is quite different

Holding back the housing market?

Many regions across the country (Rockford, IL; Houston, TX and Lexington, KY, for example) are experiencing record-breaking sales.

Certain housing sectors boast the same. For instance, multi-family housing showed quite positive gains in late August, according to MPMag.com.

While existing home sales increased 2.5 percent, nationwide, housing starts fell 4 percent in July. But the number of building permits, on a national basis, increased 8.4 percent.

Even the roller-coaster-like new-home (single-family) sector doesn’t tell a tale of woe. While sales are down, they’ve been up for the previous couple of months.

Additionally, SFR, condo and apartment builder sentiment is rosy, according to WorldPropertyJournal.com. Add to that Fannie Mae’s numbers that show consumer confidence in housing is at a record high.

So, why all the doom and gloom about the real estate market?

The “R” word

Recession. The U.S. is years overdue for one so it’s not a question of if the economy will contract, it’s when. After all, we’re now in the longest economic expansion in our history.

The “R” word, however, scares the public. Few mainstream Americans are aware that recessions are a natural part of the U.S. economic cycle and place the blame on the president, congress or whoever holds the current bogeyman title.

The last recession was largely caused by the real estate market, the memories of which are giving current real estate consumers the jitters.

Most economists say that the impending recession will not be caused by the real estate sector. Therefore, we can look to past recessions (with the exception of the last) to learn how real estate was affected.

If we’re about to experience a global economic downturn, as some doom and gloomers in the media are claiming, it certainly isn’t affecting many foreign housing markets.

News out of Australia claims “Australian homes fly at auctions in a boon for prices.” Toronto, Canada is enjoying a healthy real estate market as well as is Manilla, PH and even Vietnam. The UK is seeing a more-than 6 percent jump in home sales over this time last year.

You may need to talk your prospects down off the ledge with all of this anti-market hype. It’s only natural for them to be completely confused right now and you can help them clear it up.

Write a blog post stating the truth about the market and then share it on social media. Send infographics with the “Myths and the Realities” of the current market to your prospects.

Most of all, let your potential sellers know that they can relax because the chances are good that their homes may actually increase in value when we enter a recession,

The media is doing a disservice to not only real estate consumers but to our country’s economy as well. The misleading headlines, the omissions of positive aspects of the market lead to a widespread perception of a problem that simply doesn’t exist.

Show consumers homeowners are selling by sending out the Multi-Photo Just Listed postcard from the  Multi-Photo Series.