We Are The Change We Seek
"i got this" - Kenny Wyland
This isn't where I thought I was going to be when I looked forward into my life, but here I am....
Yes We Can
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2009-09-14 5:02 PM
Great Weekend, "I Survived Real Estate 2009"
I had a great weekend! It started out with a black-tie dinner with Theresa, Kyle and Tiffany at the "I Survived Real Estate 2009" event put on by the Norris Group. It was a Benefit for the Susan G. Komen "For the Cure" foundation which supports medical research into a cure for breast cancer as well as supporting those currently fighting a personal battle against it. We all like happy and healthy woman and we all like breasts so that's a win-win in my book. *thumbs up*
It was a wonderful event, so hats off to Aaron Norris and all of the other people who helped to put the event on. There were several speakers from different aspects of the real estate world and they all had different views of the industry and different ideas they wanted to convey. They are all big hitters in their fields, but in general terms we had: a Realtor, a Mortgage Banker, an Appraiser, an Economist, a Builder, an Auctioneer and a Foreclosure specialist. We heard a lot of facts and figures, a few political views and the longer the discussion went on we even got a few heated words on the stage.
The heated words among the panelists primarily came from Christopher Thornberg, the Economist of the group (and my favorite), when he responded to Pat Combs, the President of the National Association of Realtors. She was talking about fiscal responsibility and about ensuring that the price of a house properly reflects its true value and that's when Thornberg interjected. You could see he was boiling over and he just had to get his hand on a microphone. He stated a fact that prices had gotten out of control in 2006 and had tripled over the course of 3 years and the National Association of Realtors had supported all of the price increases and even had their internal economists publish reports supporting the ridiculously high bubble prices that came directly before the crash. Combs was not prepared to get called onto the carpet in such a fashion and her response that they had legit reports that supported those high prices was lame at best and insulting to the intelligence at best. Realtors aren't bad people but they have a direct monetary incentive for real estate prices to be high and so when they climb, you can bet that Realtors are going to support it, so it's just a question of incentives. It was good though that the different voices on the stage had different viewpoints from their different fields within the real estate world.
However, the contradiction of ideas wasn't just between people. I was often taken aback during some of the presentations by the presence of internal inconsistencies or at the very least complicated situations that appeared to be contradictory. I'm incredibly new to this whole industry and these people have obviously been doing it for a very long time, so it's hard for me to stand up and say, "You're wrong" but some of the stuff just doesn't make sense to me, so my logical puzzle-solving mind is looking for the missing piece to make it all work out. I fear that missing piece simply doesn't exist.
The person with whom I had the greatest disagreement was Tommy Williams, a former President of the National Auctioneers Association. In your life, you have never met someone who more vigorously supported a pure free market than Mr. Williams. I'm going to talk more about free markets and such in a future video, but I want to hit a couple of points that stuck with me from his presentation. He started off his presentation talking about the scary evils of the government stifling business and used China as an example and then contrasted it with the beauty and bright lights of a completely unregulated and unhindered free market that he wants in the US. My biggest problem with this is... uh, dude, have you SEEN China? If there is any economy in the world that you need to be afraid of... it's China. For the 26 of the last 28 years, China has had a GDP growth between 7% and 14%. Those are PHENOMENAL numbers. The 2 years that only showed a 3-4% increase per year because the Chinese govt actually throttled growth because it was worried they were growing TOO fast and wanted to avoid a crash. Using China as an example of bad economics is simply not based in reality. I'm not saying that we should be like China, I'm just saying that painting them as the big bad dark evil future of our economy is propaganda and not fact.
The other contradiction that is still with me and I'm still trying to figure out is the reliance on the invisible hand of the market when it comes to housing prices... I know I sound like an anti-capitalist, but I'm not. I'm a big fan of it. Bruce Norris is the founder of the Norris Group (a wildly successful real estate investment firm in California) and he seemed to me to be a very practical, feet-on-the-ground type of guy when he was speaking about real estate investing. He put forth a real problem that his firm encountered recently and looked for input and suggestions about fixing the problem on a large scale. The situation went like this: He bought a house supposedly valued at around $105k for about $50k. He spent $35k on improvements to the house and then put it back on the market. He received 6 offers all around $120k for the house, but the bank's appraiser said the house was only worth $87k and so the deal wasn't worth pursuing. His stated problem was that the appraiser was shorting him on the value of the house, because according to free market standards that house was worth about $120k. I listen to this and I think to myself, "Yeah, that's no good. The house is obviously worth $120k because there are at least 6 people willing to pay that much for it..." but then I immediately think, "Well, that's not really true is it? Because in 2006 there were plenty of people making ridiculously high offers on houses and those houses weren't REALLY worth that much which was seen in the subsequent crash." So, on one hand we're all in agreement that the market was completely out of control 3 years ago.... and on the other hand we're arguing in favor of letting the market set our prices now. I know that Bruce Norris and these other experts are light-years beyond me when it comes to experience in this market and knowledge of the way it works... but it just feels to me like we're ignoring the data even after seeing the boom and bust cycles first-hand. After the fact we blame "well the market was out of control" when the price is ridiculous, but when the prices aren't high enough to make us happy then we say, "well people are interfering with the market.
So... meh. There's something missing and I need to figure it out, because it doesn't make sense to me.
Regardless of all of that, it was a wonderful evening and I absolutely enjoyed listening to all of the speakers, even the ones with whom I do not share political views. A special thanks should go to Tiffany and Kyle both of whom worked to raise money for the Susan G Komen foundation and support medical research to fight breast cancer! Thanks you guys!
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