On Chicken Little, Booming & Crashing, Insanity and Herd-minded Snakes

This morning, “Seth” made a comment on the “cool island living web site” post. I believe he intended to comment on the “Chicken Little” entry (either here, or here). I always appreciate comments on the blog and wish more readers would comment. It helps lead to healthy debate. Debate is educational, as well as fun.

I’m re-posting Seth’s comment here, as well as my response. I didn’t just want to move Seth’s comment to the Chicken Little post, as I don’t know if he bookmarked it intending to return. I’d hate for him to come back to continue the debate and not be able to locate his original comment. I’m re-posting it here, because I know a lot of people will miss the exchange if it’s buried in the depths of some comment, and it’d be interesting to hear other’s opinions of what Seth and I both have to say…

1. Seth Oct 25th, 2006 at 1:13 pm
   Your use of the term “chicken little” is interesting. It reminded me of a little article in from Salon: http://www.salon.com/tech/htww/2006/09/19/lereah_watch/index.htmlThis prompted me to look at your website, where to my my surprise, your “review of the data” in response to the burning — “is there a bubble about to pop in Phoenix” — question came courtesy of NAR.Yes, the very same National Association of Realtors for whom the best known shill in the history of real estate, Mr. David Lereah, is laughably “Chief Economist”.Your quarterly reviews are a year behind — I wonder how you find the time to update a blog so regularly, yet exclude all 2006 Q outlook when data is readily and easily available for interpretation and publication, and at the same time, most revealing? I guess we can conclude that it’s because it’s not as glamorous as those earlier reports so visibly available on your site. You’d have had to report that in comparison of 2006, Q2 over Q1, one would see clearly that though inventory increased in excess of 50%, sales increased just less than 10%, and average number of days on market increased just over 10%. I’m not an economist, but I sure do know what happens when supply runs over demand.

   It’s in your interest to spin market conditions accordingly, and I understand that perfectly. You make a valid argument about appreciation needing to be evaluated on a multi-year, cost-base basis, not just year-after-immediate-year.
   But a crash is a crash! The stock market losses of 1987 were not considered a decline or correction — it was considered a crash, even though historic market appreciation up to that time (and now beyond) was and still remains in the black. Let’s call as spade a spade, and a crash a crash.

   We’d have a lot more respect for your kind if you would just do us the courtesy of not taking us for a bunch of idiots. Yes, we pay you 6% when we should be paying you a flat fee, and we blindly trust your judgement in home inspectors, escrow officers and lenders, but that doesn’t necessarily make us retarded – actually, maybe it does.
   If people like Lereah can use the term “Boom” to describe rapid appreciation, the public and media types should be able to use the word “crash” to describe rapid depreciation or pending doom.

   But, I don’t expect the mostly uneducated, lazy, colossally greedy and herd-minded snakes that constitute real estate agents in the greater Phoenix area to understand the finer points of representation, psychology, language and perspective.

2. Jay – The Phoenix Real Estate Guy Oct 25th, 2006 at 9:17 pm
   Seth -Thanks for visiting and commenting. I’ll attempt to address your points one at a time: The Salon article: difficult to glean much from that, as it’s full of non-functional links. My calling the media “Chicken Little” when it comes to how they portray housing market news is certainly not original, but I didn’t borrow that idea from David Lereah. It’s simply a product of my overall opinion of the media in general. I try to avoid politics on this blog, so let’s leave it at this… my general disdain for the media began years ago with what is, in my opinion, their overriding tendency to go way left of center when reporting “news”. That spills over into how they report pretty much anything. But they are in business (for now) to sell newspapers, and sensationalism and headlines sell newspapers.
   
   The Phoenix Bubble Isn’t Bursting” article on my website being a product of the NAR: True statement, and it’s clearly marked as such. Do I provide a “counter”? Nope. Do I explain that it’s from the NAR and may be biased? Nope. Being clearly marked, I feel no need to point out who wrote it. I also assume my readers and site visitors have the intelligence to know that the NAR may be biased in their presentation. I don’t think it’s my job to provide, nor do people really care to see, a point/counter-point argument for every bit of data posted either here or on my website. Could my assumptions be flawed? Certainly.

   My quarterly reviews are a year behind: Correct again. I’ll get a new one up someday (though it will be in a completely different format). It’s been on my to do list for, oh about a year. You wonder how I have the time to update the blog so regularly and not them? In many ways, the website quarterly reports have been replaced by regular blog posts on market stats. I actually made a conscious decision to put less of my personal opinion (”Spin” to use your term) into the quarterly reports and just reports the facts on this blog and my site–so people can form their own opinion. I frequently provide basic market stats on this blog here, here, here, here, here, here, here, here, here, here. (I probably missed a couple.) I also provide listings and sales stats on the website. This page has monthly listings, sales, and days on market data for all of 2004, 2005, and 2006 to date, in addition to yearly summaries from 2002 – 2005. You may also be interested in the 2006 quarterly reports on the stats page. I didn’t write them, but they do contain some interesting sales/listings stats.I think I provide my site and blog visitors with plenty of data to form their own opinions. I’m not sure they need my little quarterly summaries any more.

   “Let’s call as spade a spade, and a crash a crash”: I’ve got no problem with that. I just don’t think the market has “crashed”. Softened, absolutely. Will it “crash”? Again, I think not. Others obviously disagree. And of course, I could be completely wrong. Perhaps our definitions of “crash” and “softened” are just different.
   
   “We’d have a lot more respect for your kind if you would just do us the courtesy of not taking us for a bunch of idiots. Yes, we pay you 6% when we should be paying you a flat fee, and we blindly trust your judgment in home inspectors, escrow officers and lenders, . . .” I don’t take people for a bunch of idiots. If anything, I probably give most people too much credit. I assure you that none of my clients are given solitary inspectors, escrow officers or loan officers to consider. I always provide multiple recommendations, if I’m asked for one. I suspect that I’ve dealt with far more inspectors and escrow and loan officers than the average person has. Most people buy and sell what, maybe a half dozen homes in their lifetime? So they have a half a dozen opportunities to work with inspectors et al. spread out over 40 – 50 years. I deal with that many real estate transactions in a month. That doesn’t make the average buyer or seller an idiot. It simply means that because of my profession, I’ll have far more experience with good (and bad) inspectors, escrow companies and loan officers. Not a single client of mine has ever been required to use anyone I may recommend. I educate my clients and let them make their own decisions. (Oh, and I’m not all that opposed to a flat fee model as I’ve posted here.)

   “If people like Lereah can use the term “Boom” to describe rapid appreciation, the public and media types should be able to use the word “crash” to describe rapid depreciation or pending doom.” Sure they can. I don’t use the term “Boom”. I’ve used the term “insane” and “nuts “. I don’t believe a 10% drop in appreciation following a 50 – 60% gain is “rapid depreciation”. It’s a correction in my book. The opposite of “insane” is “sane”. And I think we are in a far more sane market than we were. But if someone wants to use the term “Boom” then yes, they are certainly entitled to use “crash”. But if they are going to use boom and crash, then they need to be prepared to argue constructively with people like me that prefer insane and sane, or nuts and normal.
   
   “But, I don’t expect the mostly uneducated, lazy, colossally greedy and herd-minded snakes that constitute real estate agents in the greater Phoenix area to understand the finer points of representation, psychology, language and perspective.” Hmmm, I could almost take that as a personal attack. But given that on this very blog I’ve lamented about some really lousy agents, I’ll get over it. If I might defend myself just a tad though… “Uneducated”? I was Valedictorian of my college class. Graduated Summa Cum Laude. I don’t have a Master’s, but I did take some grad school courses, where I continued my 4.0 GPA. “Lazy”? Hardly (well, except when it comes to updating my site sometimes.) Very few lazy people will work full time, take part time consulting jobs, sit on their HOA Board of Directors, volunteer in the community, serve on their town’s Human Relation Commission, and drive their teenagers all over creation. “Colossally greedy”? Not this agent. While I do enjoy premium beer, and I must have TiVo, I live in a modest home in suburbia and don’t drive a Cadilac. Most of my money goes to feed a 15 year old boy that can eat a half pound of bacon and eight scrambled eggs — and that’s just for breakfast. “Herd-minded snakes”? I don’t think so. I believe much of what I post right here flies in the face of what many in the real estate industry think and do. Besides, snakes are solitary creatures, they don’t hang out in herds.

[tags]real estate bubble, phoenix real estate, chicken little, uneducated, lazy, greedy real estate agents[/tags]

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