The Reality Behind Negative Forecasts

Anybody else out there getting fed up with all the negative forecasts you're hearing?  I am!  Let me give you a little perspective.

Isn't it funny how when the "pundits" forecast gllom and doom the public is always quoting them.  When they forecast good things, they don't seem to get the same following.

Recently, I had a client tell me that he wouldn't buy real estate in the near future.

"Why?" I asked

"Because prices are going down!"

"How do you know that?" I said

"Because everyone says they are going down"

"Okay" I said "What did everyone tell you about the price of oil last July?"

"I guess they said it was going to go to $200 a barrel" he admitted

"And where is the price of oul today?"

He thought about it and said "Less than $50 per barrel"

"OK" I said "What tdoes that tell you?" 

I answered my own question "By the time that "everybody" knows something, chances are that they are probably wrong.  When the bellman in your hotel is touting stock market investments, you know that's probably the time to get out of the market.  When the pundits are forecasting doom and gloom, that's probably a buying signal.  Nobody ever got rich following the crowd."

I did a little research on our Okanagan real estate market over the past 5 years, comparing the forecasts to actual results.  Here is waht I found out:

2004 Forecast: Prices up 6-8%.  Actual result: Prices up 19%

2005 Forecast: Prices up 8-10%. Actual result: Prices up 17%

2006 forecast: Prices up 8-10%. Actual result: Prices up 19%

2007 forecast: Prices up 10%.  Actual result: Prices up 18%

2008 forecast: Prices up 6-8%. Actual result: Prices down 3%

What does this tell you?  Over the past 5 years, the pundits did not get it right once.  As a matter of fact, their margin of error was 7-10%.  Simply put, real estate forecasts are nothing but a SWAG (Scientific Wild Ass Guess) estimate.

So, when these same pudits are telling you that we are in for a couple of years of recession and a year of negative price growth in real estate, please remember that a year ago, no one was forecasting a recession for Canada, or lower real estate prices. 

Conclusion: They had no idea what was happening then and they have no idea now.  They don't know we're into a recession until we have been there for a while and they don't know recovery until it's obvious to just about anyone else.

Its a great time to buy real estate!  Prices are down as much as 15% from their peak in spring of 2008 and interest rates are at an all time low.  It makes sense! Don't let the supposed experts get you down. 

If you're selling real estate, don't focus on where the price was last spring.  Remember the price you originally paid.  And keep it in mind that if youare both selling and buying, you are doing both in the same market, so it doesn't matter whether prices are up or down.

Have a great year in 2009!


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Bo Skapski

Bo Skapski

CENTURY 21 Assurance Realty Ltd.
Contact Me