David Blitzer is probably an angry man. I say that in the assumptive, not the pejorative, based on some of his comments this week. His venomous attitude towards the housing picture proves he’s either a lifetime renter, or just a guy who gladly sold all of his real estate in 2007. Mr. Blitzer came out last week with an authoritative decree that “the double dip is almost here”. Da da da dummmmm…. If Mr. Blitzer says it, let’s assume it absolutely must be true. Now let’s take our new economic religion and follow it from Washington all the way back to the 53147. Follow me.
Remember, for the sake of our journey, that this massive double dip, in its current state, simply means that housing prices appear to have stalled in the recovery. For the past couple months, they’ve been inching downward on a national level, to the tune of like tenths of percentage points. Never mind the fact that Blitzer’s own housing index is still 4.4% above where it was in April of 2009, it’s not the overall momentum that matters, it’s the minutia of the crawl. Tenths of percentage points fill Mr. Blitzer’s dreams in much the same way that waves and sunshine fill mine. Now the stage is set, the price declines are bound in the corner with a heavy cord of context, and we’re still traveling the gold paved roads to Lake Geneva. We may or may not have arrived at this point by traveling through a wardrobe, but the effect is the same.
This past summer, you were a buyer. There was a house that you really, really liked. Like, like, liked. This house was quite ideal, and for moments in time you even imagined living in this home. You mentally placed yourself on the pier, planted in an Adirondack chair, comfortable in your ownership. Your children played, your wife appeared even more ravishing than usual, and you were content. You were, in your mind, the king of your new Lake Geneva castle. You felt this way, but you didn’t act on it. You poured over the internets and newspapers and press releases. You did your due diligence. You didn’t get where you are by being a fool, and your penchant for avoiding irrational mistakes has long been a hallmark of your fiscal endeavors. And so, basking in your smartness and catching glimpses of your perfectly coiffed hair in the gilded mirror of your suburban home, you decide that Mr. Blitzer and his friends are right, and housing has yet to find its bedrock. You explain this to your family. They respond with feigned nonchalance. Your wife drinks heavily that evening.
You passed on the house in July, and now in January you find yourself content with the news that prices have dropped, at least on a national level, as much as 1% in year over year comparisons. Your wisdom knows no bounds. Your AH HA! moment has arrived. The buyer who did buy that house- the one you wanted- has been steadily enjoying himself since the August closing. Never mind that it was, for a moment in the clouds, your pier. It seems he doesn’t know that, nor does he care. He’s busily making plans and improvements that will make the summer of 2011 a memorable one. A summer spent on your pier. Sleeping in your bed. Parking his boat where yours was to be. Never mind that, you were the right one. You were the one who saw this ginormous 1% national drop coming. You’re the one who won.
The issue here isn’t who won or lost, the issue has more to do with the impact of a 1% price drop. If the home you wanted was for sale, and now it’s sold, and you didn’t buy because you felt the market remained soft with outlying downward potential, where does that leave you? If the buyer who harnessed his purchasing power and found the deal that he too was looking for, does it make you smarter since you sat out the decline? If the home that you wanted has indeed declined in value, perhaps 1%, does it have any recognizable impact on either the owner of that home, or on you, the once serious suitor of that very same home? If the new owner isn’t a new seller, and that home can never again be purchased, by you or anyone else, does that 1% price drop make you the outright winner, or the victim of your own over-analyzing intellect? Does the fact that a chunky Realtor in Lake Geneva told everyone in 2009 that we wouldn’t see big declines or gains in pricing, instead we’d bounce along a bottom trough for some years before seeing sustainable upward momentum in a glorious prediction that makes Mr. Blitzer’s reactionary statements look juvenile mean anything to you?
The simple truth of price indexes is that they fail to take into account exclusivity. If you were the same buyer last summer, and instead of looking at Lake Geneva you were busy making the dreadful decision to buy a “vacation” condo in Streeterville, things may be different. If you were intensely eyeballing a bank owned condominium where JUST 20% OF THE UNITS REMAIN!!!, and you were one of 30 buyers looking to buy one of those remaining units, this price drop has more significance for you. Your purchase would have indeed been premature if made from a solely financial aspect, since what it was you were looking to buy is available again and again and again. Sure the kitchen and living room might be reversed, and one unit looks at a shiny tall building and another looks at a graying squatty building, but the market is the same. The unit you wanted isn’t unique, and chances are something nearly identical will almost always be available, no matter the economy or price point.
Lake Geneva is a unique market, with the driving force behind it being a high level of exclusivity. If you miss out on a house because you felt Mr. Blitzer was going to bring forth news of this horrific 1% national decline, that doesn’t make you the winner. It makes you the guy who over thought the process and in turn resigned himself to his unfortunate suburban fate. Daniel Gross dealt with this issue by putting up a basketball hoop. If playing basketball on a blistering asphalt driveway in July is your cup of tea, then perhaps the guy sitting on your pier, drinking your lemonade, casting your fishing pole lazily into the late afternoon sky really is the loser. Mr. Blitzer, your vacation home is ready.