The leave-no-stone-unturned school of homebuying.
I shouldn't tell tales out of school, but for the past week I've been overhearing—okay, I've been eavesdropping on—another agent in my office who's wrestling with what must be the World's Toughest Relocation Buyer.
Here's the relo buyer's list of must-haves:
No problem, except that:
This home doesn't exist, not twenty minutes from Mountain View, not even forty minutes. It does exist in Mountain Home, California but nobody around here seems to know where Mountain Home is, except that it's probably two hours away in heavy commute traffic. But the relo buyer won't accept this.
Why not? I'm not inside his head, but I think part of his disbelief comes from the sticker shock I know so well and see so often. Welcome to Paradise! Now empty your pockets! The house he wants almost certainly does exist where he hails from, and most likely in ninety-nine percent of the markets around the country. Maybe whoever hired him didn't level with him about local home prices, or maybe they did and he didn't want to hear it. Maybe the relo company never had an agent drive him around looking at homes while he was here interviewing, or maybe it did and he didn't learn. Maybe (probably) no one told him that the "generous" housing allowance he's getting is barely enough to rent a room with kitchen privileges around here.
Another part of his problem may be a lack of trust—maybe he thinks his agent is incompetent or lying or too lazy to make a sale. That's certainly the feedback he's giving his agent. He didn't pick the agent, his employer's relocation company did. "Maybe another agent would do a better job", he thinks.
Up to this point I feel for him. And we can learn from him, because lots of bright, well-meaning buyers have faced or are facing many of the challenges he faces, the challenges that go with buying in one of planet's priciest real estate markets. But I also sense something less sympathetic: I overheard his exasperated agent retort "everybody here is a Ph.D.", so maybe there's a sense of entitlement based on his education level. Yet another part of his problem may be an unwillingness or inability to let reality interfere with his dreams. This single-mindedness reminds me of the "I can do anything I set my mind to" attitude that makes me flinch every time I hear it because it sets up the speaker for bone-crushing disappointment by denying our very real limitations, personal as well as financial. Maniacal focus may (or may not) be a gift, but anyone who goes around thinking they're an irresistible force hasn't met the immovable object called market reality. And perhaps there's a touch of plain old arrogance: "I know my housing options better than someone who's spent the past fifteen years selling homes in this area".
That's lotsa problems (and lotsa speculation) (and lotsa great ideas for future articles in just three paragraphs), but if I'm even halfway right, it's enough to derail anyone's homebuying plans before they leave the station. But I'm going to speculate even further, and say that the biggest of these Everest-sized problems is an idea best-expressed by an erstwhile buyer quoted years ago in Money Magazine: "We realize that our options are extremely limited in the current market. But I just believe that if we keep looking, if we look harder, we'll find something".
Yes, Virginia, you will find something. But it'll be the same something you found last week-end, and the week-end before, and last month, and six months ago, just with a different address. Homes you can afford but don't like. Homes you do like but can't afford. Welcome to the club.
Now, I'm not going to claim that home prices never go down around here, and that a neighborhood unaffordable to you today will be unaffordable to you forever and ever, amen. But I am going to claim that the leave-no-stone-unturned approach to homebuying has three big flaws. First, prices in the most desirable neighborhoods, the neighborhoods our relo buyer wants, whether he knows it or not, neighborhoods with great schools and all the other stuff that invariably goes with them—tree-lined streets, nearby parks, good shopping, convenient location near jobs—these neighborhoods haven't lost value dramatically. The neighborhoods that have lost value by as much as fifty percent since 2007 are most buyers' second-choice neighborhoods, neighborhoods with poor infrastructure and, often, poor location. Or maybe they're in a city that in 1992 earned national notoriety as "the murder capital of the U.S.". Or maybe they're in a region that boasts four of the top five car-theft hotspots in the country.
The second flaw is that home prices are sticky. They go down gradually, at least in sought-after neighborhoods. So a neighborhood that's unaffordable today is most likely going to be unaffordable next week, next month, and several months from now, no matter how many rocks you look under.
But I've saved the biggest flaw for last: a mega-marketing machine some of you may have heard of called "the Internet" that reaches the home of virtually every buyer, guaranteeing that no undiscovered gem is waiting for the hard-searching buyer to stumble across and snag. When every buyer in the county knows about a house, that house will sell for market value. There are no garage-sale bargains in real estate.
And now that I think of it, that's what makes this relo buyer's attitude so ironic: the Internet was supposed to keep his problem from ever being a problem. With listing prices and even sales prices just a click away, how could any pre-approved buyer be in the dark about what neighborhoods, cities or regions he or she could afford? In fact, isn't that, along with all the other real-estate-demystifying "information" on the 'net, supposed to make the buyer's agent obsolete? Didn't the 'net vault us into the Age of the Talented Amateur, aka the Internet-Empowered Consumer?
So where's our relo buyer now? His agent is telling him—begging him—to rent, but our buyer has his tasters set on some of that good long-term appreciation real estate's famous for. And the last I heard, he'd found a place he can afford that seems to meet all his parameters. It even has five bedrooms, not just four, and he could probably walk to work, all for a very affordable $150k.
It's a double-wide trailer. That's going to depreciate, just like a used car, not appreciate. While he pays rent every month for the ground it sits on. He's found the worst of both worlds. And although the trailer park is in a highly-regarded school district, the neighborhood elementary and middle schools have poor test scores.
Maybe some stones are best left unturned.