Follow the Numbers, Not the News

It started out innocently enough.  An email popped up in my inbox from a real estate investor I’m connected with on LinkedIn.  This investor, who shall remain nameless, was responding to an article titled ‘Mortgage Picture Brightens, for Now’ I sent out via Twitter.  He brought another article to my attention that stated 1 in 10 with a mortgage faces foreclosure.  This discussion quickly evolved.  Here are a few excerpts: 

Me:  I’m in Phoenix and these reports don’t accurately depict what is going on in our market. Real estate is a local business. I’ve flipped 5 homes here since the expiration of the tax credit – all of them sat on the market less than a week. Demand here remains strong and in many areas there is less than a two month supply of homes. While median prices may dip another 5-10% that doesn’t bother seasoned investors because they will adjust their buy price accordingly.

Investor:  The current inventory in the Phoenix market has never been higher with for sale signs literally everywhere. I do a significant amount of business in Phoenix. I have a client in Phoenix who buys over 20 properties per month at sheriff sale at dramatically reduced prices. The listing time on residential properties continues to longer than we have ever seen. Obviously, no two investors see the market the same way. That’s what makes apples and oranges.

Me:  Actually inventory levels have been higher. At this moment there are 43,566 homes for sale on the MLS. Two years ago there were 53,511. Days on market today – 172. Days on market two years ago – 383. I agree with you that things have slowed down here but to say that inventory levels and listing times “have never been higher” and are “longer than we have ever seen” is not accurate. Check out Mike Orr’s Cromford Report.  I buy about 4-5 houses a month at the courthouse steps. I have a few that aren’t selling in dead areas, but in other parts of town inventory is moving.

Clearly this investor and I have different views of the Phoenix housing market.  He has based his investing decisions on what someone else has told him (news articles, clients) and on the amount of for sale signs he sees when he visits Phoenix.  I choose to buy when the actual numbers make sense.

Since this exchange took place last week I’ve put two more homes into escrow, one of which I didn’t even have to list on the MLS and it’s all because I follow the numbers, not the news.  What Warren Buffett once said about stock investing can also be applied to real estate, “be fearful when others are greedy and greedy when others are fearful.”

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2 Comments

Filed under Investing

2 responses to “Follow the Numbers, Not the News

  1. As a real estate agent, we should be reviewing the motnhly statistics before we go out on a limb and say this, that, or the other thing. We need to able to speak from the hard numbers that our various MLS provides us and show our present and future clients we know what we are talking about. I send PDF files of various reports to my clients regularly to show them just how the market is behaving and not how the news media portraits it. Afterall, their job is to sell papers, mine is to sell real estate. Great article.

  2. freerealestateeducation

    Steve,

    You are a real pro. What most people (and news stories) lack is perspective. If these outlets want to promote fear I’m fine with that. It just creates more opportunities for us.

    Thanks for reading!

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