I remember (not so fondly) the day I first heard the term “it’s a new paradigm” applied to real estate. I was appraising a small apartment complex over in the Middle Town area of San Diego and the investor was telling me that he would have no trouble finding a buyer for his overpriced property (a 1920’s 4-plex divided up into 8 tiny units) because it was a new paradigm and the old rules governing the real estate market no longer applied. This was just after the Dot.Com blowout. When I mentioned the last time I’d heard that phrase it was proven false, he corrected me by saying that real estate was different. He proceeded to give me all the reasons why – you can see it, you can live in it, there’s only so much of it, etc..
Since that time many people took up that anthem and the ones who have locked in their profits have indeed prospered during this unprecedented run-up. I must confess to no small annoyance that my foolish attempts to forecast the timing of the cycle were thwarted in large part because of the unforseeable evils of credit manipulations and central economic planning on the federal level. I never again make the mistake of assuming our gov’t will stand by and allow the RE market to do what it does. Or in underestimating the effect that market psychology has on economic trends. We live, we learn.
Anyways, even though my timing was badly incorrect, the underlying premise that I used, that the fundamentals basically create the long term trendlines, appears to be reasserting itself. I haven’t heard the phrases “New Economy” or “the old rules don’t apply anymore” for quite some time now. They seem to have been replaced with the less assertive terms “soft landing” and “slowly hissing”.
The rash and unending market optimism that was the trademark of our he-man permabulls appears to have been replaced with the quiet desperation of a theater usher trying to prevent the mob from panicking as they flee from the fire. “Remain calm and slowly exit to the right in an orderly fashion”.
In the dry smoggy congested town of Phoenix, AZ, they even conned themselves into thinking it was different, as home values ran up 50% over 2 years. Now they have an inventory glut.
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