Nearly 90% of consumers recently polled say they are not interested in buying a home any time soon. A joint poll of the Associated Press and AOL indicated that the recovery of the housing sector will not be any time soon if the retail American consumer has anything to say about it.
60% of those polled stated that they were DEFINITELY not going to buy a home anytime soon while just 0ver 10% said they would be looking to purchase a new home in the near future.
You don’t have to be a mathematical genius to see that there is a tremendous amount of inventory available for a very slim and decreasing demand. If supply and demand ideology is true, then it is safe to say that there are going to be an overwhelmingly increasing number of unsold homes.
Since unsold homes equates to unearned commissions, what are the majority of real estate agents going to do? Almost two years ago, we wrote what was viewed as an inflammatory article announcing the NAR Going Out Of Business Sale. Doesn’t sound too far fetched anymore does it? You see the herd is thinning by the day and everywhere you look another agency bites the dust.
Don’t Believe It’s A Going Out Of Business Sale…Then Somebody’s Lying To You!
While this news of prospective buyers not wanting to purchase any homes is somewhat disconcerting, it’s not the main reason to be alarmed. It’s merely a by product of a continued misunderstanding of the simple economic precept of supply and demand.
Many current home sellers do not understand it, and many listing agents do not understand it. It is my opinion that if this theory was more understood and accepted, then it is possible that the housing market would not be in the state that it is.
The Laws of Supply and Demand represent the cornerstone of economics and these laws are the basis for a free market economy. DEMAND is based upon how many buyers are interested in acquiring a certain product or service AND how much of that service or product they are interested in consuming. The latter part of that statement is often overlooked.
When planning to bring a product or service to market it is prudent to have a good understanding on not only the consumer’s desire for a product, but also knowing how much of that product the consumer is willing to…well consume.
When you go to a movie, you come to the theater and take a seat and wait for the film to begin. As you sit with your popcorn and soda, you see the room begin to fill up. The theater owner knows there is a certain part of the neighborhood that will be interested in a certain film, what is harder to forecast is how many of those in the neighborhood are actually willing to purchase a ticket at that particular time and in the near future to see THAT particular film.
In real estate, with a tremendous amount of inventory, there are less and less buyers willing to even purchase a home and the Realtor working in that particular market can not determine which home any prospective buyer will purchase at any particular price at any given time. The irrefutable laws of supply and demand are working negatively on the pricing of inventory in the real estate industry.
While certainly there are SOME buyers out there looking for homes in any given market, and that is a given, what has now been determined by the latest AP/AOL poll is that the market of available buyers willing to consume at the present time and foreseeable future has dwindled considerably.
The “law of demand” is important for those in the real estate industry to understand. This basis of enterprise states that the higher the retail or asking price of a good, the less consumers will DEMAND that product or service. In black and white this is an undeniable fact, point blank…the higher the price, the lower the quantity of the demand. Add in to the mix a perceived decline in value and you have a recipe for economic disaster.
In the present real estate market, there exists a declining consumer base willing to purchase any home, at any price at any time in the foreseeable future, while you have an incredible, growing supply of product flooding the market and FURTHER influencing prices downwards.
In is incomprehensible how any seller or any agent can be utilizing the obsolete CMA or comparable system of pricing homes on the market right now. Real estate seems to be one of the only businesses wherein price is not determined by an accurate and intelligent assessment of supply and demand. Why?
Real estate professionals are either not understanding the proven laws of supply and demand or are seeking to ignore them. The former is remedied by an actual study of economics and business, the latter spells certain supplantation for those unlearned.
Maybe the NAR should have saved the $40 Million it spent on the “Great Time To Buy Campaign” which was DOA when it was unveiled. While I agree it is indeed a great time to buy, the message was futile and lost. It should have been the “Great Time To Buy At A Price People Are Willing To Pay – No Such Thing As A Low Ball Offer - No Offer Refused Campaign”, maybe that campaign would have had some legs.
I am sure there are some top producing agents out there that will indeed weather this storm, but if approximately 90% of the consumers WILL NOT be buying a home in the foreseeable future, is the Great Realtor Famine upon us?
Talk about playing with a statistic…
In any given year, only about 12% of people have been looking to buy/sell a home. So, that means that in a given year, 88% of the population wasn’t in the market.
So, if that has dropped from 12% to 10%, will 90% of the agents go away? I hardly think so. We will probably see a drop of active agents around 25%, though. And we could easily lose twice that many without seriously degrading the experience for consumers… most of the business goes through the top quarter anyway.
Hi Lane, the number to the Associated Press is 1-212-621-1500, the number to AOL is 888-265-8001…if you feel they reported erroneous data feel free to give them a call.
The bottom line is..is there an increasing supply and a decreasing demand. Dispute the number sif you wish..the law of supply and demand is irrefutable.
I have to agree with lane on this one, and the AP said this . Just 11% are certain or very likely to buy soon, down from 15% two years ago.
At the peak of best market in history, only 15 percent were likely to buy soon, so I don’t think a drop to 11 percent is really that big a deal. Will some realtors not make it, To the best of my knowledge, it’s always been that way. A very high percentage of new realtors never make throught the first year.
Larry..thank you for your comment. Just what data do Realtors accept as valid?
I’ll tell you what I accept as valid, Barry, and that’s the incessant “gloom and doom” prognostications of fringe media types such as yourself. Once the irreputable lenders, cow-towing appraisers, undereducated and misinformed buyers, unrealistic sellers and newbie make-a-quick-buck realtors are driven from the marketplace, my profession will once again be largely filled with integrity, experience and professionalism and the Negative Nellies like you will have to find a new subject to irrationally pontificate about!
Hey John,
Wow…”irreputable lenders, cow-towing appraisers, undereducated and misinformed buyers, unrealistic sellers and newbie make-a-quick-buck realtors”
Leave anybody out??? Want to insult anybody else in the real estate food chain? How about profiteering home stagers, how about high fee home inspectors…maybe the guy who charges a fee for placing your yard sing…hmm… I am sure we can find more people who are causing you not to be making the type of money you want to be making.
Things not going to well in your neck of the woods? Maybe an anger management class might be in order.
Seems like it’s everybody else’s fault. By the way..as I often ask those who think we are negative…have you ever actually listened to our show..or any of the guests that we have had on?
I don’t want to assume…but it appears not.
Might want to tune in, I think you’ll have a whole different outlook.
While you bring up a valid point, that the effects supply and demand are changing our market, you are clearly distorting statistics for attention. People don’t chose to move because of the market, people move because of jobs, family needs, and finances. This is how the housing market differs so greatly from the stock market. Where the stock market is about numbers and business, housing is about people. Supply and demand does effect pricing and how long homes stay on the market, but it cannot effect a family’s need to sell one house and move to another. It’s not about the market, it’s about needs.
Our market here was extremely strong in 2006 and many people heard that the real estate industry was a place to make money as a real estate agent or flipper. So we did see an influx of agents and investors. I sincerely do hope that this downturn will weed our the week agents and investors in a process of ‘survival of the fittest.’ This would be great for our area, our prices, and our market.
However here in Austin, the market is slowed but is still strong, and like so many in the media, you are simplifying the state of the housing market nationally. And real estate is SO local, that these are times when good real estate agents are needed so badly to help buyers and sellers, as experts, to find the best options. This again is an opportunity for the best to shine and the weak to fail.
But there will always be PEOPLE needing to buy and sell homes. Why blame the consumer whether or not they will be making money on a transaction. It’s not about the agent, it’s about the consumer. A real estate agent’s job is 10% sales, 10% transaction knowledge and experience, 10%negotiating, and 70% costumer service making people’s live easier during a stressful time when they need to move.
Sorry Barry… AP and AOL didn’t make the assertion that 90% of the agents would be going away because 90% of consumers aren’t buying homes this year… Yuo twisted that one all by yourself.
Too easy.
Lane..I did??? Where?? You may want to really look closely and actually READ!
Let me help you as obviously you must be somewhat challenged.
Here is the title:If 90% of the Buyers Go Away Will 90% Of Realtors Go Away As Well?
Notice the funny looking hook thing after the word “Well”? (there it is again)
It’s called a question mark. I NEVER made any assertion, I asked a question. Sorry you misunderstood.
Guess it wasn’t that easy after all was it? (oops..there’s that sneaky thing again!)