Editorial, Market Conditions, REALonomics

The Anniversary of My Ignorance

September 12, 2008 by · 1 Comment 

Some things just stick in our minds. There are certain tiny memories that implant themselves in our memory banks and take up residency for reasons unknown to us at the time.

Such was the case for me in September, 2005.

That was the month and year that I first noticed the beginning of the waning of the real estate market. Not that I was too concerned, having sold my company in April of the same year. The market reports and online articles that typically flood my computer screen seemed different than those to which I had become accustomed. I noted the change and went on. “Oh well,” I remember thinking, “just a statistical blip…a temporary abnormality.”

Little did I know that this would be the anniversary of my ignorance.

In the Summer of ’05

In ’05, the market was ablaze, sales were happening, loans were funding and people were still entering our industry in unprecedented numbers. The gold rush was on!

Within and throughout the real estate industry there was attitude. We were strutting our stuff like peacocks in a 4th of July parade. Companies had shattered their all time sales records. Being a million dollar agent was akin to being in preschooler. We were producing $10 million, $20 million and even $50 million dollar agents, like water from an open spigot. Agents had become accustomed to $100k, $250k and $500k incomes after a couple of years in the business. Most of them spent every cent of it on guess what? Real estate.

But now, looking back, I’m asking myself, was there too much pride, too much self-confidence? Were we shackled by our lack of clear thinking and proper vision?

Were we engaging in ignorance? Were we flirting with a dangerous kind of collective ignorance?

I wonder if I am to blame for some contribution to the market bust. I wonder if “we” are to blame. I wonder if our industry is to blame for not being pragmatic and disciplined in the advice given our clients regarding their purchase of homes with inordinately inflated prices and mortgage rates too good to be true? Yes, I know hindsight is 20-20 and second-guessing can be dangerous. But the real estate industry and our power over people can be a dangerous thing if we are in any way self-diluted.

I’m beginning to think about how “we” qualify our clients. Forget the mortgage industry for a moment and focus closer to home. I’m thinking about the thousands of John and Mary Does to whom we owed our utmost fiduciary in all matters pertaining to the acquisition of real property. I’m wondering just how well trained our agents really are and how accountable we were in the Summer of ’05.

In the Summer of ’08

We now find ourselves exiting the summer of ’08. We will most likely face a frosty Fall in which we will not be close to anything we can call a recovery. Every day a news story breaks that delivers another hammer-blow to the already weak market. While politicians pontificate, the market continues its retreat.

Those markets that heretofore were boasting “we’re okay over here,” are now feeling the crunch as their inbound buyers are unable to sell property in order to commit to relocation. Underwriting rules are being revamped almost daily. Banks are tightening up and even denying loans to their A+ customers. Some banks are closing their doors. Freddie Mac and Fannie Mae are in a state of reorganization.

In the summer of ’08 I’m soul-searching. Are you? I’m wondering if our industry needs to soul-search and create a list of “things gone wrong.” A list of things we will vow to never repeat. As I muse, I’m wondering what our collective ignorance avoidance checklist would look like.

There hasn’t been much, if any, talk about our role and responsibility in the market crash…we can finally call it a crash without being chided and derided for negativity. Yes, we love to point our finger at the favorite scapegoat and counterpart in the millions of transactions from which we benefited, the mortgage industry. But what about me, you, us? What about the professional real estate industry called Realtors®?

After all, weren’t we pretty happy? No, let me correct myself, “delirious” is the word I should use to describe us in the summer of ’05. Weren’t we delirious when we collected those commission checks, one on top of the other in the summer of ’05? Weren’t we beating our collective industry chests just a little, figuratively speaking?

The Anniversary of Our Collective Ignorance

September, 2005 will always be the anniversary of my ignorance. Sometimes I’m forced as an industry analyst, consultant and supporter to ask questions and to say things in ways that are designed to get attention and to challenge the real estate industry with questions like this one:

“Was September, 2005 the anniversary of our collective ignorance?”

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