Over the past decade, being a buyer has been hard work. It’s been fun, sure, but the buying of the peak was nowhere near as fun as the selling of the peak. To be a buyer in the post-peak era, things have also been fun. Even if you timed the purchase “wrong”, it was still fun. To be a post-peak buyer has meant belonging to a crowd who has claimed ambivalence as their chief allegiance. If we are to recognize post-peak buyers for one thing, let us recognize their collective lack of motivation. In this lack of motivation and lack of movement, there has been a victory achieved by doing nothing.
That lack of anything resembling motivation has been, at many times, a post-peak buyer’s best and dearest friend. Motivation has been maligned as the real reason for the bubble in the first place. Buyers were motivated to buy out of shame and out of greed, but mostly out of fear that their prized vinyl sided manse would sell to another before they could get their pre-approval letter out of their back pocket and into the manila folder that lay on the floor of their Realtor’s yellow Hummer. The housing detractors would have you believe that the yellow-hummer-driving, snake oil salesman Realtor was to blame for repeatedly whipping up this motivation, but they’d be wrong and as such should be chastised for their inability, or at least unwillingness to look further at the issue of why this boom was so dramatic and the bust so incredibly lengthy.
Two years ago, when the market was stationed at the peak of its illiquidity, I wrote a bumbling piece on this blog that landed me some obscure radio show on some equally obscure radio station in San Francisco. I argued in the piece that when viewed on an individual transaction level, the macro-economics of the nation mattered little. I also argued that interest rates were only marginally important, which is the highest level of Realtor sacrilege. My thinking was, and is, that buyers buy when they’re confident and refuse to do so when they’re scared. The entire real estate cycle can boil down, quite simply, to the identification of how many buyers are confident and how many would-be buyers are scared. If more buyers are confident than fearful, the market will be improving, or at least holding its own, and if more buyers are scared, well, we know what that looks like (see 2008, 2009, 2010, 2011).
When a particular market is in transition from a period of stagnation to a period of growth, it matters only how that particular buyer group of that particular market is feeling. Follow me on this. If the national market is still filled with more buyers who remain reticent and scared than with confident, motivated, buyers, that matters little to individual markets. If an individual market becomes more heavily weighted in favor of confidence than fear, that individual market will buck sales trends with ease. This phenomenon is why upscale vacation home markets around the country are doing well this year while other nearby markets remain prone on the ground, with unmotivated primary home buyers kicking it repeatedly without noticing that it is already down and beaten.
Lake Geneva today is a market in transition. I offer this up to you as a truth today, not as a wishful prayer that I’m hoping might be mercifully answered, nor as a fevered pitch aimed at exciting. I see the market today as it is, and it is a market filling with buyers who have found motivation where previously there was none. That isn’t to say that all is rosy, as it isn’t. There are crushing debt burdens on state and national levels, and the possible inflation that lies in wait. There is a weak dollar and a tentative stock market. There is a president who wages a war against the wealthy- a war fought not most markedly with legislation- but with fear inducing rhetoric. Unemployment remains high, food prices remain high, and my gas tank still requires $92 before it is satiated. There are plenty of problems.
Yet in spite of the broader difficulties, the buying demographic that is looking forward to a lifetime of weekends spent at Lake Geneva has slowly transitioned from anemic to virile. This increased buyer activity appears in full swing right now, and while it should be a positive for the market, I can’t help but consider the buyers in this market who have possibly jumped the gun by being spurred on by the activity they see around them. Many have purchased homes for prices that make little sense, but when you consider the emotional component of a slowly evolving market, the sales cannot be applauded, but they can be understood. There are other buyers who remain entrenched in the comfortable philosophy that served them well during the past several years. These are the buyers who are finding the return of buying competition to be annoying, and perhaps unnerving, and certainly unwelcome.
When markets slowly come back to life, even as prices in many individual segments continue to soften, some buyers will be ready to move while others will not. If I remember anything from the early and mid-2000s it’s that sooner or later, these buyers who are being burned by more motivated clones of themselves will find their own motivation. And when that motivation comes, it won’t necessarily be spurred on by interest rates or stock market returns or national employment figures. It will be spurred on in the grand model from the earlier part of the last decade, when buyers bought because they desperately didn’t want to see someone else sitting on the pier they know should have been theirs.