One of the things I most dislike about real estate mania is the mania part. I want real estate to make sense. I want pricing to make sense. I want comparable sales to matter and I want national and global trends to be reflected in valuations. I want to see things in order. Mania, on the other hand, craves chaos. The concept of real estate valuations being based on something, on anything, has no place in the world of real estate mania. Sadly, the mania that should be slowly dissipating is clinging to certain segments of our market.
It should be obvious to anyone that the market today is different than the market from one year ago. The mania of 2021 has been replaced, or so goes my theory, with a more measured approach. An approach that appreciates certain things, like comparable sales and macro financial factors. Yet, for all of the apparent indicators, the mania persists. And, like the prior years, the mania is not rooted in anything except recklessness disguised as FOMO parading as motivation. Today I see too much mania in our market, and I despise it.
As soon as it seems that pricing is going to make some sort of sense again, someone bucks the calming trend and spazzes out. It’s like a pod of trout in a slack backwater upstream from where the weekend anglers fish. You see the trout and you present your fly. No takers. You present it again, no takers. And again, and this time, your line slaps and the pod spooks. The fish are aware of your presence and they’re not going to be fooled by your ridiculous fly tied from last fall’s roadkill. But you fish anyway, because you’re there and so are the trout. Cast seven. Eight. Twelve. And then, on the fourteenth cast, after all of the fish are aware of you and dedicated to ignoring your offering, a trout slashes and eats. You fish because you just need one stupid fish to ignore all of the signs. Today, supply side mania is on the hunt for the fish that doesn’t know any better.
I see offerings on the MLS that make zero sense. Sucker pricing, I’ll call it when we’re discussing certain properties in private. What’s happening today is clear to me. Sellers are largely reticent to reduce their pricing. New inventory is being priced off of existing, unsold inventory. These sellers are propping themselves up on the backs of unsold inventory that is similarly overpriced. If that house is worth $X, then mine should be worth more. The issue is that the subject property isn’t worth $X. In fact, it might be worth 70% of $X. No matter, says the mania, let’s price higher than the wrong price. This is what’s happening today and it’s happening in all segments of all markets. Surprisingly, the worst offenders are popping up in the non-lake access markets.
I see this particular segment performing much like the segment performed in 2006-2008. This is not to say I see a 2008-2013 style market in the offing. I don’t. Not at all. But I see buyers who have been priced out of blue chip lake access homes buying the sorts of homes that they would only buy in the absence of proper inventory. I saw this happen in 2006 and I see it happening now. The only difference is the pricing in 2022 is 200 or 300% higher than it was in 2006. These offending properties are looking for buyers who aren’t aware of the market trends and I find the opportunism to be gross. If you’re a buyer today, don’t be fooled by this pricing. Stand up to it. Ignore the overpriced homes and focus on value. In spite of everything you’re thinking, patient buyers are still being rewarded.