January 18, 2008  -- by Ralph Merritt Nedelkoff

    Once again, the media revels in messages of doom and gloom.  And it seems they are always a step or two behind in reporting the news on real estate.  They love to talk about a "bad" real estate market--a "down" real estate market-- a "meltdown" in the real estate market.

    First of all, the fact is there is no such thing as a real estate market.  That's right!  They talk about the real estate market as if it were just one big national market.  Not so!  Instead, we have many, many markets.  We have regional markets that vary greatly.  We have local markets that vary greatly.  We have neighborhood markets that vary greatly.  We have Ultra-Luxury markets,  Luxury markets, Upper-Range markets, Mid-Range markets, Entry Level markets, Home markets, Condo markets, Foreclosure, Pre-foreclosure  and REO markets, and we have Investment Property markets.  Some may be up and some may be down.  One may be up in sales activity, and one may be down.  One may be up in price, and one may be down.  One may be up in price and down in activity, while another may be level in price and up in activity.   One may be better for buyers and one may be better for sellers.  And each of these markets may be quite different in different local areas around the nation. 

    This has been proven by statistics again and again over the past year and it will be proven again this year.  The total number of sales in the US was down last year.  So was the median price.  Sales activity for the nation has been down considerably over the past couple of years.  But all that was the sum of many markets, not just one big market.  This, quite simply, is true.  So, what's this real estate market the media keeps talking about and putting down?

     The "real estate market" the media is talking about is not really a real estate market.  It is really two other things:

1) It is a summary or characterization of the aggregate statistics of the nation on sales activity or inactivity that happened many months ago--generally two to fourteen months ago.  It is definitely not today's market because today's market is being created today!  And it is being created by activity in thousands of neighborhood markets, in all price ranges and in all types of properties.  If sales were down last year, then does that mean that sales will be up today or down today?  The answer is that what happened in regard to sales statistics last year should not determine what happens today.  Statistics change monthly in each locale.  And buyer and seller activities change daily in each neighborhood, in each type of property and in each price range.  What matters much more than stale statistics are the other important factors that the media talk about--and in fact help to create and influence--when they talk about the so-called real estate market. 

2)  It is really today's mood, today's psychology, today's mentality in regard to buying, selling and investing in real estate.  This image, whether true or false, is what the media is all-powerful in creating, influencing and making a reality.  When the media talks about the market, they are talking about the image they create of some imaginary huge market.  They create today's local mood based upon last year's national statistics.  Is this wacky or what?  It may be crazy--it may be unfair--but it is true.  Propaganda and images tend to become reality.  Perceptions create reality.

    The bottom line is that the so-called "real estate market" becomes what the media creates.  Whatever the media creates, believes, labels and sells us will very likely come  true.  Images influence our thoughts.  Perceptions do create reality.  We attract what we focus on.  This is the ultimate power of the media.  They naturally tend to focus on and exaggerate the negatives.  They often lead with sensational  headlines that often frighten people, and many times are not actually corroborated by the actual facts--or are based upon something that happened months ago.  The media informs us.  Of the past--of the nation as a whole--and in real estate, because of the time lags in the buying and selling process and in reporting statistics--of the distant past.  Unfortunately, all of this influences our thoughts and feelings and moods today.  Fear sells.

    President Franklin Roosevelt may have come up with the absolute greatest piece of wisdom regarding economies, markets and especially our so-called real estate market--which is really our real estate market psychology that we feel today.  He said, "All we have to fear is fear itself."   It is so true.  What we fear most, we will attract into our reality.  If the media frightens us into thinking things will be terrible.  Then things will become terrible.  We attract what we focus on and what we believe.  If we believe that things will be fantastic, then they will become fantastic.  Right now, most of the media are churning out fear, doom and slop in general.   There may well be fear, doom and slop for some people this year, but certainly not for everyone.  We have to realize that we have the ability and the power to change things--in our lives, in our businesses, in our areas, in our markets...and ultimately in our nation.

    When the Fed cuts rates and the Congress passes a stimulus package and it is signed into law, the mood will likely shift a bit.  The media may actually create some "cautious optimism."   More American may become cautiously optimistic.  And real estate sales may slowly increase in '08.  Or, the consensus of the media might be that no matter what we do to stimulate the economy, we will not pull the real estate market out of its meltdown mode.  If this is what is spread, then this is what will come true.  The national media dictates the national mood, and perceptions create reality.  In other words, if we believe it--it will come true.

    Last year, residential real estate sales activity was down in many but not all areas of the nation.  Prices were down in many but not all areas.  However, Luxury sales and prices were up in most areas. 

    Luxury and Ultra-Luxury markets are quite different that the overall markets in most areas.  These markets are driven by different forces and by different psychologies.  Although some sectors of the American economy have weakened recently--such as residential real estate sales, residential construction, residential financing and some areas of consumer spending--most other sectors of the national economy remain quite strong.  And other nations' economies remain strong.  These conditions are extremely favorable for buyers of Luxury and Ultra-Luxury properties!  And these buyers are far less influenced by the negative media and by sub-prime debacles.  These are very intelligent and highly successful individuals who look for opportunities!  Quite a few of these buyers may be foreigners holding strong currencies who recognize the Luxury opportunities in America.  Wealthy individual in our nation and worldwide are sitting on trillions of dollars of cash and liquid assets.  What appeals most to them when the media calls for uncertain times?  They orchestrate a flight to quality, a flight to tangibles and a flight to creature comforts.  In residential real estate it means a flight to valuable Luxury and Ultra-luxury properties.  Today, we truly do have wonderful Luxury and Ultra-luxury real estate opportunities.

    Just yesterday, Donald Trump declared that our national residential real estate market has been in a depression for quite some time.  However, he quickly added that his Luxury business in New York City has been extremely strong and is still very strong today!  He also said that he is involved in many Luxury development projects in New York, around the nation and around the world!  He is now negotiating on another Luxury project in California.  Trump excitedly announce that NOW is a tremendous time to buy real estate and make money!  And it is a tremendous time to sell Luxury real estate and make money.  He is clearly less concerned with past markets and totally focused on seizing the many amazing opportunities today.

    The Luxury and Ultra-Luxury niches are quite different.  Expect them to thrive in most areas of the United States this year! 

Be Great! In '08!

--Ralph Merritt Nedelkoff