I received a call from a student today who is a real estate agent.
He asks: You know what is happening in the real estate market, yes? Nothing is happening right now.
I say: Yes, I know, I say. But that doesn’t necessarily mean it is bad.
It is a perception that bad things are happening all at once. Economy growth down, interest rates up, housing sales down, travel up, headaches around travel up, goods selection down, covid cases up, stock market down, stress up, 401K’s down, wait times up, temperature up, water supplies down, life satisfaction down. See-saw! What is up should be down; what is down should be up. The topsy-turvy world we live in.
Human beings understand their world through comparison. And people tend to compare their experiences to recent past experiences and the expectation of the future. But life isn’t that way.
Let’s take the housing market. My first mortgage back in the late 1990s was around 10%. My second mortgage for a larger home in 2002 was 3.75%. I checked today’s rate. It is around 5%. Between my first and second home, there was a mortgage crisis and a complete meltdown of the housing market. People lost their homes to foreclosure, the highest rate being in 2010. The rate in 2010 was 2.23%. In 2005 it was .046%. In 2021 it was 0.11%. During the Great Depression, it was over 13%/1000 mortgages.
So in 2022, the housing market has cooled from its firey, wild state fueled by low-interest rates and, might I add, low inventory. Now things are moving back to normal. And yet, real estate agents are concerned because buyers are backing off. Why? Because they can’t get the ultra-cheap money anymore. IT’S A PERCEPTION OF BUYERS (AND REAL ESTATE AGENTS) THAT HOUSES AREN’T A BARGAIN. The market has adjusted to earlier levels.
What we experience are perceptions based on comparisons of past experiences and expectations of the future. We expected the housing market to stay at the current level. When it changed, buying a house was less attractive, not because it is less attractive to own a house but because people perceive that with higher interest rates a home may be unaffordable. And it may be.
We have experienced a lot of changes in the last three years. Well, we continue to experience changes throughout our lifetime. We got used to working from home, now we have to work in an office. We got used to low inventories of certain goods. Now they are abundant and it feels good to go to the store and find what we want on the shelves. We didn’t put a lot of miles on our car, now we are driving and paying more for gas. We’ve come off of a time of cheap gas. We think gas should always be cheap. But gas prices have fluctuated. In 2010-14, gas prices were over $3.00/gallon. Also, in the 1970s gas was cheap but supply was limited. Many people waited in long lines at gas stations for hours to get gas and hoped there was still some when they got to the pump.
If you are low on cash, $100 is a lot of money. If you are flush with cash, $100 doesn’t seem as valuable. It is the same $100. How you look at it determines its value.
We are experiencing over 34 days of 100-degree temperatures. We are praying for some 90-degree temperatures that seem cool. But 90 degrees seems hot when comparing it to 70 degrees.
When we do short-term comparisons, we find ourselves upset at the change especially if it is perceived as negative. It is only a change. It isn’t necessarily bad.
My student said, Oh, what is the “saying”? Necessity is the mother of invention.
When things change it is time to do something different. It is time to be more flexible and creative. Look for solutions where you haven’t looked before. When there are wide-spread showers, it is easy to put out your bucket and get your bucket filled. But when there is a drought, it takes the most flexible, creative person to learn where to put the bucket to get it filled.
Keep these things in mind going forward:
- What we have done in the past may not work now.
- Remember we get used to the way things are but they are always changing.
- If we spend our time thinking about how bad things are and wanting a roll-back to easier times, we will miss opportunities in the present to create success.
- Remember that things are only good or bad with comparison. They are not good or bad, ONLY DIFFERENT.
- Every change is an opportunity to learn something and grow from it.
- As far as it is bad right now? Look at what you are comparing it to. We’ve just come through a time of low-interest rates, but low inventory, and free money (for many). Things are actually going back to something more normal.
And so my student’s last comment?
Then it is a time for growth.