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Real Estate, The Economy and the Cycle of Fear

Real Estate, The Economy and the Cycle of Fear

“The only thing we have to fear is fear itself.” – Franklin Delano Roosevelt

Several years ago, about the time of the near-demise of the American and worldwide economy following the collapse of Lehman Brothers, near-collapse of Merrill Lynch and the forced bailout of AIG, I made the conscious decision to wean myself off the news.

This wasn’t the result of someone preferring the life of an ostrich, head buried firmly in the ground, or of a mushroom (in the dark and up to his neck with, well, stuff) … in the days the Dow Jones Industrial Average was swinging wildly I alternated between Fox News and CNN on my Sirius satellite radio, figuring if I listened to each side blame the other I might be able to glean the truth.

It wasn’t a question of whether the topics of the day interested me. Check out my profile on GetGlue (which I use mostly to start conversations about different books on Facebook without having to work too hard for the links) and you’ll see among this year’s four dozen books to date (not all compiled there) several tomes about what happened in September 2008 on Wall Street and elsewhere.

Mostly I stopped because I found the news was affecting my attitude and leading to a series of self-fulfilling prophecies. Of course no one, given the uncertainty on Wall Street and the subsequent credit crunch, would be purchasing homes. Yet Q4 2008 was the strongest final quarter of a year I’d posted to date, largely because I found when I stopped assuming no one would purchase because of fear, I discovered folks who would.

In short, the issues on Wall Street weren’t really impacting me directly but they were causing in me a blossoming, inexorably creeping and damaging sense of fear.

“Courage is not the lack of fear but the ability to face it.” – Lt. John B. Putnam Jr.

Fear unquestionably has been the driving force on Wall Street for the past week. Down 1,000 points between Monday and Wednesday. Up nearly the same 1,000 points when you add together the other three days. All noise and fury signifying nothing, a violent, frightening roller coaster ride that whips people from side to side, flips them upside down and then returns them to the station essentially at their original starting place.

Some emerge from these rides feeling the rush of adrenaline, the thrill of survival though there’s little fear that the journey, no matter how harrowing, would be fatal. Others are so overwhelmed by the fear that they miss the entire survival message and instead focus on the sheer terror of the drop, regardless of the rise just around the bend.

“In politics, what begins in fear usually ends in folly.” – Samuel Taylor Coleridge

Yes, there was what was regarded as a concrete cause for the initial and secondary drop – S&P’s decision to downgrade the U.S. debt – though how concrete the cause truly is can be left for debate. If you’re not someone who’s invested in the market, would you have felt the rumble of the downgrade? Did it really change anything you did last week? Didn’t think so.

And even if you are someone who’s invested in the market, by the time the week ended you were on average right back to where you started from; at least, the larger market was about back to where it had been before the gyrations began.

What really happened, other than S&P pulling down the collective pants of our nation’s political “leadership”, a group of individuals far more concerned with scoring points for their own particular intractable ideology than in actually working together on some sort of reasonable solution?

There is no leadership right now. There are no ideas. There are no solutions. And few seem interested in searching for them, not when there are political chits to be accumulated. That is, unless you consider inviting your fellow governors for a weekend of prayer to help heal the nation’s wounds to be a viable solution.

Yet, for all that … we continue moving on in our lives. We wake up. We go to work. We send our kids to school. We cook and eat our meals. We watch Bachelor Pad and in the process help keep alcohol-related businesses flourishing since it’s impossible to watch this show without a healthy buzz.

In the real estate markets, some continue to buy while others wait, fearful of a further drop in home values. When inventory was higher, many would try to protect themselves from said drops by offering and sometimes purchasing a home for well below market value. Except … those low sales soon became the comps so, instead of anticipating the gentle decline and getting ahead of it, the purchases hastened the drop causing a plummet akin to an elevator whose cables have been cut.

While some right now rightly are worrying about their jobs, their retirement, their 401(k)s, others are taking advantage of low prices and low interest rates to purchase. Fear exists, I’m certain, but not to such a degree as to discourage forward movement.

This week on Wall Street, the only true losers from this week’s travails are those who may have sold on Wednesday during the second plummet in three days rather than wait until the gyrations stopped and the market found a level. Our local paper said the week was driven by a combination of fear and hope; I can assure you, fear dominated that matchup. It always does. Without question. Without debate.

In our core, human beings are creatures of fear. Television stations know this and prey upon those fears, reporting stories in such a manner that a viewer would seem to be uncaring of anything in life not to drop everything to learn about “the latest danger confronting our teens” or a “new scam preying upon the elderly” or whatever other sort of sweeps week melodrama is created in the newsroom.

When the real estate market is flying out of control, the local newspaper would write about those poor buyers who couldn’t get an offer accepted. When values dropped, no one wrote about the buyers anymore; the story now was sellers who were having to adjust their own judgment as to the values of their property.

Either way, the angle taken dealt with the perceived victim. Because that’s what sells. And because that’s what we as human beings generally perceive ourselves – victims of fate, victims of circumstance, unable to control any part of our own destiny.

Shutting off the news doesn’t change that basic nature but it limits the opportunity for outside forces to prey upon that instinct to our own detriment. It doesn’t give you an excuse for ignorance (except for possibly not realizing the lead singer of Warrant had died) but it allows you the freedom to not allow fear to dominate your existence.

None of us know what tomorrow will bring … literally, no one knows what direction the stock market may go tomorrow. Panic selling – and make no mistake, it’s panic selling – could win the day or investors will settle in a bit after the past week. Confidence in Washington would help but, at least from this seat, I’m not sure how it possibly will come given the current cast of characters in the executive and legislative branches alike.

Nor am I overly optimistic about those who would seek what has to be the least-sought after job in the world; it almost seems like anyone with the sense necessary to take that job are smart enough not to do it.

These can be scary times, no question. But that doesn’t mean we need either to be scared or to proactively feed our fears.

“We gain strength, and courage, and confidence by each experience in which we really stop to look fear in the face… we must do that which we think we cannot.” – Eleanor Roosevelt

Photo credit: MSVG via Flickr Creative Commons

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