realonomics

Bernanke, our Federal Reserve Chairman, has once again reported to Congress. His verbal treatise indicates that we have not reach economic “omega” and that we can expect the interest rate on approximately 450,000 mortgages to adjust upward in each quarter of calendar year 2008.

450,000 X 4 = 1,800,000. Ohhh…mega!

Our inventories are now at a “15teen” (yes, SIC) month supply. A healthy real estate economy should have inventories running at about 4.5 to 5.5 months as a national average. I hear voices calling for a collective positive mental attitude (PMA) among the rank and file.

Shaping Current Failure into a Growth Model

The foreclosure market is already gaining momentum as a national growth industry. Pick up any newspaper and you’ll see local “Get Rich with Foreclosures” workshops at the local Holiday Inn. Millionaires will once again be made…déjà vu…RTC era style.

We have gross household incomes of roughly $50-70k living in homes with attached mortgages of $650 - $1.5 million. An abnormally high percentage of these mortgages will begin to adjust upward beginning in January, 2008. My HP-12C cannot make 60/75 mortgage qualification ratios work no matter how I hammer on the keys!

Ohhh…mega will come eventually but the stakes will be amazingly high before it does. PMA will not accellerate the process.

The Yellow Smiley Face as a Lapel Logo

As NAR concluded its national gathering in Las Vegas, Nevada, REALonomics perused the out pouring of editorials focusing on an industry in need of PMA…Positive Mental Attitude…in order to counter the negative forces of media reports.

No amount of PMA, individual or collective, is going to cure an industry economic model in need of a quadruple bypass. Don’t get me wrong, there is a place for PMA, but it plays no role in the operating room “fix” needed by an industry whose business model is mathematically and empirically wrong at its economic and consumer core, not to mention our property information delivery schema.

Look at the REALonomics poll results in the upper right hand corner of the REALonomics.net home page. It looks to me like the top three issues people believe are impacting this industry are (1) Sub Prime Issues, (2) Too Many Real Estate Agents and (3) High Listing Inventories. Emotional hype, smile-speak and happy face news releases will not accellerate omega or cure the 15-month inventory level.

What will assuredly produce reversal of the supply and demand trend line (a.k.a. Omega) and cure the 15-month inventory level is a serious reduction in the agent sales force and a washout of the sub prime phenomenon. This is fueled by price adjustment and the cost and availability of mortgage money to qualified buyers and investors.

It’s not Omega We Seek, it’s Alpha

Behind the scenes in the shadows of development there is a bristling reinvention of our brokerage, title and mortgage operating models that will transport us from the stage coach era to the new alpha continuum that will produce better ROI based upon TRUE consumer partnerships, a wide open property information model and new broker/agent relationships.

The industry wants to find omega, the end of our current languish. We just want things to be “normal” again (whatever that means) and to be able to see relief in the form of less inventory and more transactions.

REALonomics believes it’s not just about omega; it’s about alpha. We are caught in major economic and operational vortex that will not be cured by simply finding the end of the dilemma. We are in a quest for Model Perfect and that model will…oops, I should have said “MUST” include more than a face lift and a shot of superficial botox.

We can truly welcome omega if upon its certain arrival we are prepared to enter the New Real Estate Economy with alpha; new brokerage, mortgage and title models for a consumer-centric era.

Our lack of alpha, will extend our ohhh…mega!

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