How Soon We Forget!

Back in 2004, our firm’s real estate market research studies pointed to a growing gap between the real end-user demand for U.S. housing and the excess supply of new homes being cranked out by local, regional and national builders. Armed with that data, I began warning about a housing bubble that would be dangerous to the financial community and particularly devastating to Florida, Arizona, Nevada, and other high-growth states.

The response to my comments was immediate. Critics said I didn’t know what I was talking about. Some even accused me of purposely trying to damage the industry that I have served for more than 50 years.  Clearly, most developers, builders, lenders and property owners were emotionally invested in the boom psychology. As a result, they let their desires and perceptions interfere with the reality of the real estate market.

But unlike human emotions and egos, market trends are grounded in fact. It is possible to project demand for housing at various price points and locations, and determine what features and amenities make a difference to buyers and renters.  One of our largest clients used to say that his organization is full of people who say “yes” to his every move, so he has learned to rely on outside professionals to warn him when he is about to step in a ditch.

Even today, I hear so-called real estate analysts say, “No one could have predicted the housing crash.”  That’s nonsense. I was one of the early whistle-blowers, and I was certainly not the only skeptic who realized the sales boom would be followed by a bust.  The moral: there is simply no substitute for professional real estate market research as a reality check.