What goes around usually keeps coming around.
Or life is a pageant played out on a merry-go-round.
A few weeks ago I was surprised to learn that one of my clients didn't know our local real estate market had suffered a serious downturn in 2001.
I'm not sure who was more shocked by this, me, by the idea that he'd never heard of an economic event with such impact on my life, or him, by the idea that real estate has had more than one downturn. I neglected to mention the real estate downturns of the early 1990s or the early 1980s or the mid 1970s or the late 1960s or the...and of course, 2001 wasn't the first recession I lived through; that was 1958, although it didn't make much impression on me.
Then I realized there was no reason my client should know about the 2001 downturn. What seems like the blink of an eye to me—a sure sign I'm getting long in the tooth—was eons ago in his short life. But as various groups, politicians and agencies make sure "this will never happen again"—"this" being whatever you got: aggressive subprime lending, option ARMs, 100 percent financing, loose underwriting, real threats to capital markets and perceived threats to quasi-government institutions, a get-rich-quick market mentality, slippery human nature itself—it poses the possibility and even the certainty that ten years from now not only will current individual and institutional memories have forgotten whatever lessons these times teach, but that a new wave of players will be entering the market unaware of the past, a collective tabula rosa ready to be writ upon by the next wave of flim-flam artists.
And, in fact, I wonder how many current players are learning much from these instructive times. Because I wonder how many of them understand even their own small role, let alone the big picture.
The agents should know, right? After all, they're in the front lines. If anyone should know, it's them, right?
In the age of the specialist it should come as no surprise that virtually every agent is a specialist. A specialist by price range, by area, and by type of buyer. This agent sells $500,000 homes in East Palo Alto and the East Bay. He and his clients are members of the same ethnic group and so are the vendors and loan agents he recommends and even the escrow officer he uses. Here's another agent who sells $5,000,000 homes in Atherton and Woodside. He sells to people just like him—that's how he cracked that market—and while the vendors and loan agents he recommends aren't his social peers, they're not the $500,000 agent's peers either.
Each agent works in a completely different marketplace, dealing with completely different market drivers that have little or no impact on the other's marketplace. Each agent has little or no idea, not from experience, not from hearsay, of the challenges the other faces. The two marketplaces have virtually no points of contact. Multiply this insularity, agent by agent, price range by price range, demographic group by demographic group, by the hundreds of micro-markets in this area, each with minimal or non-existent overlap, and it's no wonder that a good, active agent will know, not the big picture, but just the realities of his marketplace. A mediocre or inactive agent won't know even that much.
The clients should know, right? Buyers and sellers? After all, they are the market, right?
There's no doubt that buyers and sellers know more about their individual micro-markets than the so-called "experts" they often defer to: the reporters, the pundits, the economists. Even so, real knowledge comes from the grind of experience, day after day, transaction after transaction, and the average client has perhaps four or five transactions over one lifespan. And each buyer or seller is also a specialist, in tune with his or her marketplace but completely unaware of others.
Well then, how about the spectators, the "neutral third parties" of the real estate marketplace? They're above the fray, aren't they? They don't have an axe to grind, do they?
Any even somewhat objective observer who reads the bubble blogs will see that these folks have an axe to grind as large as the real estate industry's. In fact, bubbleheads are as much a special interest group as the industry, just at the opposite end of the spectrum. They're as much invested, emotionally and financially, in the idea that home-buying is a snare and delusion as the industry is in the idea that no one is fulfilled unless he owns his own home. Anything the bubbleheads learn from these times only reinforces existing prejudices and perhaps adds a few more.
Reporters? They present two problems. One is the antipathy of the observer shut out of a marketplace for that marketplace and its players. The other problem is the opposite of the agent's and client's: reporters are, with rare exception, generalists, covering real estate today and a train wreck tomorrow, without the time or, I suspect, the inclination to learn the nuances of either story. And since they rarely dig deep, it seems not to occur to them that nuances exist and that they should dig for them.
Economists? After seeing their interpretations of the real estate market over the past seven years, I'm convinced that, far from being scientists, economists are modern-day shamans, living and working in, and reporting from, a murky parallel universe only they can enter because only they believe it exists. And their axe is just as big as anyone else's.
Not a promising repository of truth, collectively, for the next generation to draw upon. And where will today's players be in ten years?
I think many of today's agents will have retired, either by choice or necessity. Most of us, the ones established enough to have a decent chance of getting through this mess, are in our fifties or sixties, and who knows where we'll be in ten years? Lying on a private beach, we hope. The other agents, those who entered the business when there was almost enough business to go around? Some will tough it out, but how many? It's as immutable as a law of physics: boom markets attract new agents, bust markets repel them.
Today's buyers and sellers? Perhaps the same problem: an aging population in a time of real estate flux. Even experienced clients often show up ready to fight the last war. And as with agents, today's clients are specialists who in 2008 didn't and couldn't see the big picture and learn all the lessons.
I'm convinced that today's bubblehead is tomorrow's condo owner, partly because life has a sense of humor, but mostly because the normal and unyielding demands of time and reality, at least on the bubblehead with places to go and things to do—start a family, build a career, set down roots—will have dynamited him out of the sterile dead-end of blogs and onto the highways and byways of real life. And that's just as well, because he won't have any hard-won truths to bring to the next generation, just a few recycled urban legends. Sure, a few will hold out, 2018's version of the aging hippie, still wearing their bubble tee-shirts, still speaking their dated hipster jive, still fighting the good fight years after it's over, and the children will whisper, "Mommy, what's a bubblehead?" Maybe they can follow a rock band around the country.
Real estate economists? Like the aging bubbleheads, still dealing in myth. But unlike the unreconstructed bubblehead fighting a desperate rearguard action against time, the real estate economist is so insulated from time and reality that he stands above the pressures of both and so is never at risk of becoming an anachronism. Or useful.
What will real estate reporting look like in ten years? Based on recent trends in local major newspapers, by 2018 your local daily will be so small, physically and intellectually, that you'll need a battery of searchlights to find it in your driveway and a microscope to read it. It's hard to see how the broadcast media's coverage of real estate could get any more pointy-headed, but perhaps one TV station's promise of "all the news you need in the first eleven minutes" points the way. Or maybe the mass media will be cast on the ash heap of history and only the blogs will cover real estate, each blogger self-empowered and self-anointed, and while it's hard to believe it could get any worse, it will.
And in ten years or so the mortgage banking industry will have largely forgotten that nasty scare it got back in '08 and another financing boom will be wearing thin and another wave of aggressive money types will have found old mortgage products to misapply to new mortgage markets so the good times last a little longer and the riders on the get-rich-quick merry-go-round will have leaned off their horses a little too far reaching for the brass ring and the scoffers will be scoffing away in their blogs and all the groups, politicians and agencies will be off hunting other big game and all their laws will turn out to have loopholes big enough to fit a runaway freight train through and we'll be back in much the same place but by a different route and I'll be waiting under the clock tower with a white carnation in my lapel so you know me and your password will be "human" and mine will be "nature".