Managing Expectations

In the last couple of days there have been rumblings about "the bottom" and even a cover story in Newsweek entitled The Recession is Over * (note: the asterisk). If you watch CNBC at all and you happen to catch a little of it before you tuned in Oprah on Friday you would have heard all manner of people getting all giddy about the stock market rally, and, most notably, about the fact that the economy didn't shrink as much as expected.

That bears repeating -- the economy did not shrink as much as expected. It did not grow/expand. It just was less shrinkage?

Whooooooa, Nelly. Hold the bus!

Just because things are not getting as bad as rapidly as they have been during the past year does not mean things are good! In fact, President Obama tried to manage expectations by admonishing Newsweek for putting out false hopes to which Newsweek had to reply in another article with the sub-title: Obama Rips Newsweek's Cover. We Rip Back.

Here's the deal: Yes. Everyone would like this "Great Recession" to be over and for the recovery to start rolling. Those of us on Active Rain would really like the housing market to start rolling again. Heck, I see all this "happy talk" all the time about this or that Realtor experiencing multiple offers (subliminal message to buyers: "hurry up and get back in or you'll end up in bidding war hell just like the early 2000s"). I also hear and read the data that most of the buying are first-timers and that they're after the foreclosures with the rock bottom prices. Joe and Jane Homeowner with equity and a nice house aren't getting multiple offers. If, and this is a big if, they price their home aggressively, they'll get that one offer they need to sell the house.

If we start talking up and buying into "the recession is over" giddiness in the absence of solid data and a good strong trend we are doing our clients -- both sellers and buyers -- a grave disservice. There is nothing worse than seller thinking it will be OK to price their home high "because the recession is over" or for buyers who have been on the fence to fall back over onto the rental side of the fence because they have just pulled enough money together for that 3.5% FHA down payment and now won't be able to afford higher priced home.

The economy is finally starting to show signs of life only because of mass government intervention. What happens when the $8,000 First Time Home Buyer Tax Credit expires on December 1st? What happens if mortgage rates start to rise? Credit guidelines have not and do not show any signs of loosening up.

As real estate professionals, we need to be able to manage the expectations of our clients. It's bad enough that most of them will listen to Aunt Harriet or Uncle Jeb who was in real estate for a couple of years back in the 80s. We need to be to voice of reason. I don't want to hear "Newsweek said the recession's over so I want to pretend it's 2004 again." It ain't gonna happen.

Managing expectations may be one of the most important things we do in the coming months. We need to tell out clients, Sellers especially, that pricing their home is still the key to selling it.