Posted October 4 2010, 8:45 AM PDT by Matthew Gardner, Chief Economist, Windermere Real Estate

Reconsidering Expectations

Posted in Market News by Matthew Gardner, Chief Economist, Windermere Real Estate

I was fascinated to read my associate Karl Case’s article on housing published in the New York Times a couple of weeks ago.  In it he suggests that the “American dream” of home ownership, rather than being dead in the water, is actually alive although somewhat battered!

Agents, buyers and sellers alike are currently being inundated with market “analysis” and “commentary” relative to the current and, indeed, future of our housing market in the U.S. and the disparity between the opinions is vast.  There are some who are projecting a further 20 percent decline in value and others who believe that we have bottomed out and a recovery is around the corner.  It is all immensely confusing.

So what is the likely direction of housing as we move forward with our overall economic recovery?

It is my opinion that the mass pricing declines that we saw were a function of a meltdown in the market and that we have seen the worst of the price declines.  As we move forward, the recovery in real estate will not on a national level but will be market specific, with some areas faring better than others.  I believe that markets with better employment prospects, topographic and political restrictions that limit new development and lower foreclosure activity are likely to fare better than others.  The US Census bureau shows that we live in a country with 310 million residents and over 77 million owner-occupied housing units; to suggest that a recovery will be equal across the country is naive.

The core of Case’s argument is that the “Dream” very much depends on what one’s expectations are.  If house buying is driven by the expectation of astronomical returns, then it is fair to believe that this will not be the case going forward.  However, if buyers are realistic in their expectations of value and a good rate of return, that a home represents stability, offers tax incentives, as well as managing the fundamental need for shelter, then home ownership does indeed make sense. (Historically, housing has always appreciated at a greater rate than inflation and if you believe, as I do, that inflation is certainly headed our way, it will act as a good hedge against it.)

There is an old adage that all real estate is local and I agree with this.  As we move forward, expect markets to fluctuate depending on the above criteria.  Fear mongering does nobody any good and I hope that we will see less of this occurring as data continues to point toward improving economic conditions.



  • [...] Gardner posted an excellent article on the blog Neighborly News about the state of the American dream of home ownership. Mr. Gardner [...]

    Posted October 20 2010, 5:01 AM by The American Dream: Is it Being Reinvented? « Mercer Island Real Estate Blog

  • Well stated, Elizabeth!

    Posted October 05 2010, 4:15 AM by Matthew Gardner

  • So many people are sitting on the fence, anticipating the wind to change. It feels like a 'you go first' state of mind. As a result, so many people are stagnant and frustrated by their present circumstance and quality of life. Is it a lack of confidence or lack of focus? Is it time to tune into what we want out of life instead of being frozen by the influence of what may or may not be our reality? Is it time to focus on what makes us happy instead of being infected by this virus of negativity and fear? I say stay close to people who are focused on putting one foot in front of the other! I say we all contribute to this stagnant environment when we choose to enter into its atmosphere. It is all temporary; nothing in life stays the same for long! I say when we all take the time to really concentrate our efforts on what we want then everything becomes a wee bit better. This applies to all walks of life, Realtors, Buyers, Sellers, Inspectors, Butchers, Bakers and Candlestick Makers!

    Posted October 04 2010, 4:50 PM by Elizabeth Hunter