What will the shift do to real estate consumers’ psychology?

Referencing this article, Seth asks:

The shared belief about real estate might be in danger. The facts changed this month for the first time. The question that those that market real estate have to answer is this: will people treat a bounce in real estate the way that they think about a drop in the stock market (a chance to profit) or will it lead to a long-term reevaluation of what it means to own a house?

My prediction – absolutely. Owning a house means owning a place to live – people will pay attention to intrinsic value more than they have in some time. They will care about how much happiness they have in the home more than they care about how much equity they have. What we are witnessing is the return to a less transient real estate market (even though Charlottesville has traditionally been a bit more transient due to the University of Virginia), where buying and selling a home requires more due diligence and careful consideration than it has for the past seven years. Those who think that interest rates are high when a 30-year-fixed-rate mortgage can be had for under 7% -  need to see things in a little bit of historical context.

But is it a marketing problem? We’re seeing now the blowback from the real estate consumer to the Realtors’ belief/consensus that it’s all the media’s fault.  Blaming the media is a cop-out. The consumer is more skeptical and more educated than some might think or like to believe. Realtors should be able to frame the media’s frequent parroting of common memes in the appropriate light. There is frequently more to the story than can be presented in one thousand words or less (that’s why we have blogs).

Understanding that housing has, outside of the past 5-7 years, been regarded as a long-term investment is fundamental to the strength of the housing market.

The TJPDC says that (PDF) the Charlottesville region can expect housing demand to increase 11% from 2010 to 2020 (p.62 of the report).

Charlottesville Housing Demand - courtesy of the Thomas Jefferson Planning District Commission's State of Housing Report

The demand will be there, but the “quick buck” will be harder to find. Everyone needs a place to live.

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4 Comments

  1. Charles Woodall August 27, 2007 at 15:09

    As usual Jim, you hit the nail on the head. Especially your reminder to your audience that real estate is, and always will be, a long term investment.

    We as real estate professionals are the ones that have to educate consumers about our local market and let them know what they see on the national drive-by media doesn’t necessarily apply.

  2. Mark August 27, 2007 at 17:40

    Or maybe that real estate is not an investment at all. At best it’s a source of income, although I have seen few properties in Charlottesville that I could buy and collect enough rent upon to cover the mortgage.
    Real estate is a place to live. It was an investment from 2000-2005. If you’re looking for an investment, your money is better off in dozens of other vehicles.

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