The market is so much different now than it used to be that we should jettison all previous assumptions (paraphrased from a Rob Dawg comment years ago).
In the old days, prices would be coming down by now because the demand would have been severely impacted by higher prices and rates – but not today:
Is it just early? Maybe, but are sellers going to dump on price when there’s always next year? With virtually no foreclosures and unemployment, there aren’t the usual pressures on sellers, and most will wait it out, rather than lower their price in a panic.
The real impact will be on the number of sales. We’ve already experienced – and survived – around 100 sales per month in the off season, and if that happened every month of the year, we’d find a way to live with that too.
Sellers need to choose – do more to spruce up the house for sale, or be willing to take less. If the house is already dated and needing a full renovation, the discount will probably be getting larger, because buyers are putting up a fight.
Here are examples of the November discounts – only one sold over list:
The median sales price could levitate, or even rise, while more discounts off the aspirational list prices keep happening!
Check out a few Munger quotes below:
“A lot of real estate isn’t so good any more. … There’s a lot of agony out there.” –to the Financial Times in an April interview
“There’s no real controversy. We just had a couple of nutcases that went off half-cocked.” –on critiques of his dorm design at UC Santa Barbara in a 2021 interview.
“Lush landscaping. That’s what sells. You spend money on trees, and you get back triple.” –to Janet Lowe for his 2003 biography Damn Right!
“Here’s an area in which we have a virtually perfect record extending over many decades: we’ve been demonstrably foolish in almost every operation having to do with real estate that we’ve ever touched.” –to Berkshire Hathaway shareholders in the 1998 annual meeting.
“I did a total of five projects, then stopped. I didn’t like constantly borrowing more money.” –from Damn Right! on why he got out of the real estate game.
“I regard architecture as the queen of the arts. Think of how much more good one nice building does for humanity than one damn painting.” – In a 2021 interview
“I never had any flannel-mouthed baloney in the operation. I dealt with quality people.” –on picking the right partners for his deals, in Damn Right!
“Forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices.” –Munger quoted by Warren Buffett in his 2014 letter to Berkshire Hathaway shareholders
“I developed it because I didn’t want to let the zoning authorities rob me the way they wanted to. And now I know that if I had let them rob me, we would have had better financial results.” –on his pricey Santa Barbara development, in Damn Right!
“What kind of idiot would make the men’s bathroom and the women’s bathroom the same size? The answer is, a normal architect!” –to the Wall Street Journal in 2019
“It’s remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.” –in Damn Right!
“If you think psychology is badly taught in America, you should look at corporate finance. Modern portfolio theory? It’s demented!” –in Damn Right!
> “jettison all previous assumptions”
We need to have a long discussion about all the factors that have changed since 2007. A third are agency. Another third technology. The rest are things like presentation, marketing, demographics,.. Things like analytics cross all those.
Flattered that you remembered the comment.