Follow the Herd – And You Know What Happens

So – what kind of person are you?

Are you one of those people that listens to the screamers and over-reacters?

Or perhaps are you’re a chicken little yourself? You know the kind of person I’m talking about – they spend all of their time running up and down the street with their dress up over their head yelling “the sky is falling, the sky is falling”.

Or do you look at facts, even if they clash with “conventional wisdom” or what your neighbor or the perky Katie Couric thinks, even if the facts seem counter-intuitive?

I ask because we’re in a very interesting situation here in the real estate market in the Metro Detroit area. Very interesting indeed.

You see, I keep reading the same headlines over and over again about how many foreclosures are out there. About how many people are losing their homes, and about how bad the economy is here. This is all true, by the way. It’s even true the lenders are holding back on letting their foreclosed homes hit the market to prevent a further decline in the market.

These are all facts, and they’re all true.

But if you’re making decisions on the economy or real estate market right now based on these facts, you are making an earth-shattering mistake.

Why?

Because as I briefly discussed in a prior post, the number of foreclosures hitting the market is a lagging indicator, and a significantly lagging indicator at that. What that means is that if you are basing your assessment of the market on the number of foreclosures hitting the market TODAY, then you are basing your decision on information that is 12-18 months old! Quite simply because the foreclosure that hits the market today started the foreclosure process AT LEAST 12 months ago.

That’s right. The number of new foreclosures today is ancient history.

Using this information is exactly like driving while only using your rear-view mirror – you’re getting information that is not only irrelevant to your goals, but it may also be a pointing you, not just in the WRONG direction, but in the OPPOSITE direction from where you ought to be going.

So if you listen to my nemesis on Craig’s List  and the others that continue to post “THE END IS NEAR” messages, then quite frankly you deserve what you get.

Let me give you some additional facts on the local real estate market here that were recently published in a report by Real Estate One:

• The number of showings are increasing. There are more serious buyers out looking now.
• Relocation business is increasing as more people are being transferred into the Michigan market.
• Headhunters are working to recruit people to this area.
• Over the past 6 months, Real Estate One sales have been level; sales are same as this time last year. Which is in contrast to the past 3 years, where sales have consistently decreased every month compared to the same time the previous year.
• 41% of the office has done more business this year when compared to agent activity from same time last year.
• There are substantially more in-bound calls from signs and advertising. The average is 30 calls per day, and more calls are being converted to deals.

This, and a good deal more information that you’re not hearing about, paints quite a different picture. And, moore importantly, it points you in an entirely different direction than the one that all of the chicken littles are taking, doesn’t it?

To paraphrase Morpheus, first you need to know the path before you can walk the path.

Now you know the path.