“2010 home sales will pick up! It’s the last chance for Obama money!” (Optimistic Charlotte Realtor)
“The world is ruled by facts. People are ruled by ideas.” (Anonymous)
It might be too late to still be giving out 2009 “Best of” and “Worst of” awards, but please humor me.
“Can’t Believe You Still Have a Job” Award of 2009: Obama’s “Cash for Clunkers” sales forecasting team. As they projected a total 7-week program amount of $1B, they ran out of money before the first week was out and had to go begging Congress for $2B more.
If “prognosticatin’” is your game, and you’re off by that much, you probably need to find a new job- you just ain’t that good at it. I’m not even sure that you can qualify for horseshoes or hand grenades (where being close counts for something). However, the very next prediction you made after the sales results came in was probably spot on; you knew you were definitely getting fired. And you couldn’t argue.
But alas, you work for the federal government where the bar for dismissal is pretty high; you have to make more than a concerted effort to get a pink slip. Michael Brown, of FEMA-Katrina fame, almost made it through. Reality show wanna-be’s getting by Secret Service and hanging with the President at a private party, no problem for the security folks. So I wasn’t overly surprised when I didn’t hear anyone having to fall on the sword for the “Clunkers” miscalculation. Then I started thinking- maybe this wasn’t a mistake. And I’m not going all “government conspiracy X-Files” all of a sudden. Stay with me here.
When the news came out the “Clunkers” program was bankrupt after the first weekend, the response from the public not interested in buying a car was something to the effect of, “what a bunch of government idiots.” However, the response from the public in the market for a new car was to hop in their clunker and floor it (top speed: 35-40 mph) directly to a dealership.
My next award: “Best Public Relations Move in 2009”- won by the Clunkers forecasting team
They ensured the dealerships would be jumping for the life of the program because you never really knew when the clunkers cash well would finally run dry. Heck, it was almost over the first weekend! Human nature responds predictably to scarcity. All you have to do is check the food stores when there is even a slight threat of snow. No milk, bread, or batteries to be found. Did you ever think that it might be in Wonder Bread’s best interest to pay off some meteorologists?
What happened after 8/24/09 when Clunkers was over? Sales went down for the next four months. Edmunds.com forecasted that only 18% of the new car sales were actually new; this means that 82% would have happened anyway! They just happened faster because of the incentives.
Let’s fast forward to the $8K (or $6,500) tax credit that’s now set to expire on 4/30/10. It was first set to expire on 11/30/09 and some people (like me) were duped into thinking that it was going to be over. Everyone who was somewhat interested in buying a house rushed to their local Realtor. National home sales went up in November and December (due to the actual house closings going past the 11/30/09 deadline).
But, what happened in 1/10? Home sales were down considerably. The home buyers were just like the car buyers, rushing to get their sale in before the deadline. February’s numbers are not out yet, but if the Clunkers program is any indication of consumer behavior, the following will take place:
2/10- dead
3/10- dead
4/10- a little better
5/10- much better
6/10- big decline
7/10- awful
8/10- awful
9/10*- awful
10/10*- awful
11/10- possible slight uptick
12/10- dead
* Mix in some bad sales seasonality as the kids go back to school and families vacation at the end of the summer
Here’s hoping I’m wrong!
Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. You can contact him directly at Brett@BDFRealty.com. For a FREE subscription to “Charlotte Property Management Weekly” via RSS, click here. Or by e-mail, click here.
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